Fair Plan Coverage Is Expanded : Insurance: Industry-sponsored insurer of last resort widens its offerings in response to L.A. riots.

The California Fair Plan, an industry-sponsored property insurance pool that serves mainly urban homeowners and businesses, has beefed up its coverage in response to last spring’s Los Angeles riots.

On Jan. 1, the Fair Plan began selling new optional coverage in addition to the standard fire insurance that had been its only offering. One new option is business-interruption coverage, which compensates business owners for revenue lost if they are forced to halt operations.

The Fair Plan is also offering optional replacement cost coverage, an improvement over coverage that pays only the actual cash value of what was lost, without regard to the cost of rebuilding a structure, restoring inventories and so on.

Los Angeles-based Fair Plan has also boosted its policy limits to $3 million for ordinary commercial structures and $5 million for multi-occupancy commercial buildings such as swap meets. The previous limit had been $1.5 million.

In public hearings that followed the riots, small-business owners complained about lack of insurance availability. Some said they had been denied coverage because of discriminatory “redlining” by insurance companies.

Fair Plan, as an insurer of last resort, does not turn down applicants. Its coverage can be less expensive than conventional coverage, but was considered too limited for many business needs.

The changes are part of the Fair Plan’s attempt to address that problem. They have sparked so much interest in Fair Plan policies that its staff has been nearly overwhelmed, a spokesman said.

Only about 15,000 of the Fair Plan’s 113,000 policies are commercial; the rest are residential. However, the mix is expected to tilt more heavily toward business coverage because of the changes, the spokesman said.

Some of the new business will likely be drawn away from conventional insurers, but it is typical for the Fair Plan’s customer base to fluctuate in size as industry conditions change.

The broadened coverage is available at no increase in price, but homes and businesses must meet strict standards to qualify. For example, commercial structures must have had their plumbing and electrical wiring upgraded within the last 10 years.