California Insurers Accused of Colluding to Limit Wildfire Coverage
Two lawsuits filed in Los Angeles accuse major home insurance companies of colluding to limit coverage in California communities at high risk for wildfires, forcing homeowners onto the state’s last-resort insurance plan. The lawsuits, filed on behalf of homeowners who lost their houses in the January wildfires and all policyholders who obtained the FAIR Plan after January 2023, allege that insurers, including State Farm and 24 other companies holding 75% of California’s home insurance market, worked together to ‘suddenly and simultaneously’ drop coverage or halt writing new policies in fire-prone areas.
The January wildfires destroyed nearly 17,000 structures and killed at least 30 people, leaving hundreds of homeowners who were dropped by their insurers to rely on the FAIR Plan, which offers limited coverage capping at $3 million. Michael J. Bidart, representing the homeowners, stated that the insurers ‘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 struggles with an ongoing insurance crisis, with companies boosting rates, limiting coverage, or pulling out completely from regions susceptible to wildfires and other natural disasters due to climate change. The state Department of Insurance emphasized its focus on protecting consumers, stating that ‘Californians deserve a system that works — one where decisions are made openly, rates reflect real risk, and no one is left without options.’The FAIR Plan, an insurance pool funded by major private insurers, issues policies to people who can’t get private insurance because their properties are deemed too risky. With over 555,000 home policies as of March, more than double the number in 2020, the plan is being relied upon more than ever. The lawsuits also allege that insurers pushed policyholders onto the FAIR Plan to avoid shouldering all financial responsibility for sustaining the plan.
The California insurance crisis has prompted new regulations allowing insurers to consider climate change when setting prices and pass on reinsurance costs to consumers. However, the situation remains challenging for homeowners in fire-prone areas.
