California Homeowners Accuse Insurers of Collusion
Homeowners affected by the 2025 wildfires in Pacific Palisades, Altadena, and other California communities have filed lawsuits against more than 200 insurance companies and affiliates. The defendants include major insurers such as State Farm, Farmers, and Mercury, which collectively account for about three-quarters of California’s property and casualty insurance sales.
The lawsuits, filed in Los Angeles County Superior Court, accuse the insurers of unfair competition and violating the Cartwright Act, a state law that prohibits agreements to restrain trade, fix prices, or reduce competition. The homeowners claim that the insurers engaged in a ‘group boycott’ to terminate policies in fire-prone neighborhoods in early 2023 and refused to write new policies, forcing homeowners into the California FAIR Plan Association.
The FAIR Plan offers limited coverage at higher premiums. By moving homeowners to this plan, insurers allegedly profited from higher premiums while reducing their liability for catastrophic losses. One lawsuit seeks compensation for policyholders who paid higher premiums, while the other seeks damages for homeowners who suffered losses due to inadequate FAIR Plan coverage.
The lawsuits cite meetings of the FAIR Plan’s governing committee and insurance trade groups as evidence of collusion. However, they do not provide written documentation of these alleged agreements. Insurers have denied any wrongdoing, attributing their actions to the need to manage risk in a high-inflation environment with increased wildfire danger.
Legal experts consider proving collusion challenging, as insurers may argue they acted independently in their economic self-interest. The discovery process is expected to be crucial in uncovering evidence. If successful, the lawsuits could significantly impact California’s home insurance industry.
