Summary:

 Senate Bill 506 (SB 506):  This legislation caps the total fire coverage available under the FAIR plan at $600,000 for property in higher-risk fire service areas (class 8–10) and $750,000 for property in lower-risk areas (class 1–7). It ties these limits to fire department ratings from a nationally recognized insurance company.

 

Legislation Overview:

 Senate Bill 506 (SB 506): This legislation explains the primary goals of the proposed bill:
•	Limit the maximum liability that an insurer is responsible for when a property insured through the FAIR plan is damaged or destroyed by fire.
Maximum Insurance Limits:
•	Properties in Higher Fire-Risk Areas (Fire Department Class 8, 9, or 10)
•	The bill sets a $600,000 cap on the value of coverage.
•	Properties in Lower Fire-Risk Areas (Fire Department Class 1–7)
•	The bill sets a $750,000 cap on the value of coverage.
•	Fire department “class ratings” are determined by an independent organization based on factors like staffing, equipment, water supply, and other risk-reduction programs.
•	Higher class numbers (8, 9, or 10) generally indicate lower capability to respond to fires; thus, coverage is capped at a lower limit.
Definition: “Nationally Recognized Insurance Service” - An organization that:
•	Collects and analyzes insurance statistics
•	Promulgates rating information and standard policy forms
•	Develops and files such information with state insurance regulators
•	Rates fire departments based on:
•	Emergency communications (e.g., 911 dispatch)
•	Fire department staffing, training, and equipment
•	Water supply (availability and pressure)
•	Community risk reduction programs
•	Other relevant factors
 

Current Law:

 ENACTING A NEW SECTION OF THE FAIR PLAN
 ACT; PROVIDING A MAXIMUM INSURABLE VALUE FOR PROPERTIES INSURED
 UNDER THE FAIR PLAN.   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:   SECTION 1.  A new section of the FAIR Plan Act is enacted
 to read:   "[NEW MATERIAL] FIRE DEPARTMENT INSURANCE LIMITS.