A group of property owners affected by the January wildfires in California has filed a lawsuit against major insurance carriers, including State Farm, alleging violations of antitrust and unfair competition laws.
The plaintiffs’ complaint, filed in Los Angeles Superior Court, establishes that the insurers conspired to eliminate competition, forcing affected homeowners into the California FAIR Plan.
This latest lawsuit follows similar legal actions regarding insurers’ handling of aftermaths related to the Eaton and Palisades fires, including accusations against California’s Insurance Commissioner Ricardo Lara and the state’s FAIR Plan, particularly concerning smoke damage claims.
In their statement, the plaintiffs emphasized that property insurance is vital for homeowners, especially during times of crisis following disasters like the recent wildfires.
Michael J. Bidart, from Shernoff Bidart Echeverria LLP and one of the attorneys representing the plaintiffs, remarked, “The complaints allege that, by colluding to push plaintiffs and many others towards the FAIR Plan, the defendants have reaped the benefits of high premiums while depriving homeowners of the coverage they were willing to purchase for recovery after disasters such as January’s wildfires.”
Consumer advocacy groups have pointed out that representatives from major insurance companies regularly convene to discuss market issues, which appears to indicate a collective approach to steer customers towards the FAIR Plan while maximizing premiums.
Jamie Court, president of Consumer Watchdog, stated, “This was clearly a concerted attempt by the entire industry to push people in high-risk areas to lower benefit policies, while at the same time collecting higher premiums from other homeowners.”
The California FAIR Plan was established in the wake of the 1965 Watts riots, designed to offer insurance solutions for homes in regions where traditional insurers would not provide policies.
This plan aims to assist homeowners in areas prone to wildfires, especially as catastrophic fires have increased across the state.
Since the 2018 Camp fire, which resulted in significant losses for insurers, the number of policyholders in the FAIR Plan has surged from approximately 200,000 in 2020 to nearly 560,000 by March 2025.
The plan has projected losses of around $4 billion on claims related to the January L.A. fires, putting its reserves and reinsurance at serious risk.
In a response to this financial challenge, Insurance Commissioner Lara authorized a policy last year that permits the FAIR Plan to charge member companies a $1 billion assessment for residential claims.
These insurance companies can then impose temporary surcharges on premiums for their own customers to recover 50 percent of that amount, though these surcharges affect policyholders throughout California, not just those in fire-prone regions.
Lara’s approval is required for these premium increases, a point that has drawn criticism as opponents label it an “industry bailout” that unfairly places the financial burden on consumers.
Carmen Balber, executive director of Consumer Watchdog, commented, “Homeowners across the state should not be on the hook for the L.A. fires because insurance companies abandoned those neighborhoods and dumped homeowners on the FAIR Plan.”
The recent lawsuits argue that the state’s leading insurers colluded to cancel coverage plans, which has left many homeowners inadequately protected under the FAIR Plan.
The FAIR Plan, while providing a necessary safety net, has higher premiums compared to traditional policies and is capped at a lower coverage limit of $3 million.
The plaintiffs in the lawsuit seek triple the damages they claim to have suffered due to these practices.
Court remarked, “This is exactly the type of action that needs to happen for us to break up what is clearly cartel-like behavior.”
As of now, major insurers such as State Farm and Allstate have not responded to requests for comment regarding the ongoing lawsuits.
Hilary McLean, a spokesperson for the FAIR Plan, stated that while the organization is not named in the lawsuits, it does not comment on active litigation.
Gabriel Sanchez, representing Lara’s office, confirmed via email that the Department of Insurance cannot comment on the lawsuit as it is not involved, adding that their focus remains on consumer protection.
Recently, State Farm proposed a 17 percent emergency rate hike, aiming to stabilize its financial position to continue providing home insurance in California.
Meanwhile, many victims of the January wildfires continue to call for a formal investigation into the alleged misconduct of major insurance providers, claiming that delays and denials in claims processing have left them in dire financial situations and with uncertain living conditions.
image source from：https://www.latimes.com/business/story/2025-04-19/property-owners-sue-state-farm-california-insurers-antitrust
