Lawsuits accuse insurers of colluding to drop coverage in fire-prone
parts of California
[April 22, 2025] By
TRÂN NGUYỄN
SACRAMENTO, Calif. (AP) — Two lawsuits filed in Los Angeles allege major
home insurance companies have colluded to limit coverage in California
communities at high risk for wildfires and force homeowners onto the
state's last-resort insurance plan that offers basic coverage and high
premiums.
Insurers, including State Farm and 24 other companies that hold 75% of
California's home insurance market, were part of an “illegal scheme” in
violation of California's antitrust and unfair competition laws,
according to one of the lawsuits, filed last week.
The lawsuit said the companies worked together in 2023 to “suddenly and
simultaneously” drop coverage or halt writing new policies in fire-prone
areas, including in neighborhoods like Pacific Palisades and Altadena
that were leveled in the January wildfires that destroyed nearly 17,000
structures and killed at least 30 people. That has forced hundreds of
homeowners onto the FAIR Plan that offers limited coverage capping at $3
million, leaving them underinsured and now struggling to rebuild after
the fires, says the lawsuit filed by a group of homeowners who lost
their houses in the LA fires.
The other lawsuit includes all policyholders who obtained the FAIR Plan
after January 2023, when the conspiracy allegedly began, the suit says.
“Insurance is a product that homeowners hope never to need, but rely on
for peace of mind in normal times and for critical help rebuilding after
a catastrophe,” Michael J. Bidart, who represents the homeowners, said
in a statement. “The complaints allege that, by colluding to push
plaintiffs and so many like them to the FAIR Plan, the defendants have
reaped the benefits of high premiums while depriving homeowners of
coverage that they were ready, willing, and able to purchase to ensure
that they could recover after a disaster like January’s wildfires.”
The lawsuits come as California is struggling with an ongoing insurance
crisis, where companies are boosting rates, limiting coverage or pulling
out completely from regions susceptible to wildfires and other natural
disasters. In 2023, several major insurance companies either paused or
restricted new business in the state, saying they can’t truly price the
risk on properties as wildfires become more common and destructive due
to climate change.
The American Property Casualty Insurance Association, the largest
national trade association representing home, auto and business
insurers, said it complies with the state's antitrust laws and monitors
its members to ensure they do the same.
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An aerial view shows the devastation from the Palisades Fire on
beachfront homes Wednesday, Jan. 15, 2025 in Malibu, Calif. (AP
Photo/Jae C. Hong, File)
 “These suits defy logic, advance
meritless claims, and we are going to focus on solving the
challenges in the insurance market in California,” said Stef
Zielezienski, the group's chief legal officer.
The state Department of Insurance said it is not involved in the
suits but said its focus is on protecting consumers.
“Californians deserve a system that works — one where decisions are
made openly, rates reflect real risk, and no one is left without
options,” department spokesperson Gabriel Sanchez said in a
statement.
State Farm, the largest home insurer in California with roughly a
million policies, didn’t immediately respond to requests for
comment.
The FAIR Plan is an insurance pool that all the major private
insurers pay into. The plan issues policies to people who can’t get
private insurance because their properties are deemed too risky to
insure. The plan, with high premiums and basic coverage, is designed
as a temporary option until homeowners can find permanent coverage,
but more Californians are relying on it than ever. There were more
than 555,000 home policies on the FAIR Plan as of March, more than
double the number in 2020.
The complaints also allege that insurers were pushing policyholders
onto the FAIR Plan because companies wouldn't have to shoulder all
financial responsibility to sustain the plan. When the state's top
insurance regulator in February ordered insurers to provide $1
billion to the FAIR Plan to help it pay out claims related to the LA
wildfires, he allowed for half of the cost to be recouped from
policyholders statewide. Another lawsuit was filed last week to
block the cost-shifting regulation.
California has been in the process of implementing various new
regulations to give insurers more latitude to raise premiums in
exchange for issuing more policies in high-risk areas. That includes
regulations allowing insurers to consider climate change when
setting their prices and allowing them to pass on the costs of
reinsurance to California consumers.
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