California’s fire insurance market is experiencing significant turmoil, pushing a rising number of homeowners onto the state’s high-risk FAIR Plan for coverage.
In San Diego specifically, the number of residents relying on the FAIR Plan has quadrupled in just a few years, reflecting a broader trend across the state.
Recent lawsuits filed against major insurers allege that the top 25 insurance firms conspired to eliminate standard insurance policies, a move that is alleged to have been designed to enhance their profits while offloading risk onto the state’s last-resort insurance plan.
According to the law firms representing the plaintiffs, these companies effectively colluded to cancel existing insurance policies and refuse to issue new ones, which left homeowners with no choice but to seek the less comprehensive coverage offered by the FAIR Plan.
In their statements, the plaintiffs allege, “By colluding together to cancel existing policies and refusing to write new ones, the insurers were able to force property owners onto the FAIR Plan.”
One lawsuit focuses on Los Angeles homeowners who suffered damages from recent wildfires, while another encompasses hundreds of thousands of California homeowners who have been affected by higher rates for inferior coverage due to companies’ alleged misconduct.
The lawsuits argue that homeowners have been left with no options other than to accept reduced coverage, while the defendants manipulated the FAIR Plan to stabilize and increase premium prices for those consumers involved.
Meanwhile, the American Property Casualty Insurance Association, which represents insurers, has rejected any claims of wrongdoing from its members.
Stef Zielezienski, the association’s chief legal officer, has stated that the issues plaguing the market are instead due to “deteriorating conditions in the California property insurance market.”
According to Zielezienski, the lawsuits are illogical and present baseless claims.
The FAIR Plan, established in 1968 as a safety net for homeowners in high fire risk areas, is intended to provide temporary coverage until policyholders can secure traditional insurance.
However, the number of FAIR Plan policies has surged as private insurers have retreated from California following devastating wildfires.
From 2020 to 2024, the number of policies issued by the FAIR Plan doubled across the state, while in San Diego County, it quadrupled, illustrating increasing reliance on this insurance option.
The allegations in the lawsuits claim that insurance companies have taken advantage of the destabilized insurance market to charge homeowners inflated rates while shielding themselves from liability.
The companies have, according to the claims, inverted the FAIR Plan’s original protective purpose, transforming it into a means for raising profits while shifting significant fire liability costs back to consumers.
As part of an effort to cover billions in claims arising from the Los Angeles fires, the FAIR Plan has announced a special charge of $1 billion to insurance companies, resulting in $500 million in costs that will be passed onto homeowners, including those who still have traditional insurance.
The lawsuit states that, “As a coup de grace, the FAIR Plan has already announced that half of the losses incurred as a result of the wildfires will be charged back to the consumer marketplace.”
There is uncertainty about how these lawsuits could influence San Diego homeowners, especially those who are currently relying on the FAIR Plan.
While the law firms did not respond to inquiries, they indicated in court filings that the alleged conspiracy could extend its impact beyond those directly affected by the recent wildfires.
The lawsuit further posits that billions of dollars have been redirected from homeowners who managed to avoid devastating fire damage yet are still burdened by inflated rates for inadequate coverage.
San Diego County’s dependency on FAIR Plan policies has escalated dramatically, with policies soaring from 9,670 in 2020 to 37,375 in 2024—making it the third highest total in the state, only behind Los Angeles and San Bernardino Counties.
Last year, reports revealed State Farm’s decision not to renew thousands of insurance policies across California, impacting approximately 2,000 policies in San Diego alone.
Areas such as Rancho Santa Fe and rural parts of Alpine, Chula Vista, Jamul, Lakeside, and El Cajon experienced particularly harsh impacts as homeowners turned to the state’s high-risk plan following the expiration of their policies.
Regardless of the outcome of these lawsuits, the situation emphasizes the troubling reality that California’s last-resort insurance plan has become the sole option for hundreds of thousands of homeowners across the state.
In a related development, the nonprofit Consumer Watchdog has filed its own lawsuit against the California Department of Insurance and Commissioner Ricardo Lara, challenging the recently announced $500 million in surcharges that homeowners will be required to pay to cover liabilities from the Los Angeles wildfires.
Consumer Watchdog has labeled the surcharge as a “bailout” for insurance companies, arguing that it was introduced without public input and violates statutes governing the FAIR Plan.
A bill aiming to stabilize the FAIR Plan is in progress, introduced by Assemblymember David Alvarez, which would permit the FAIR Plan to request the California Infrastructure and Economic Development Bank to issue bonds in situations where catastrophic events threaten its ability to pay claims.
This proposal successfully passed the Assembly floor earlier this month, potentially paving the way for changes in how the FAIR Plan operates and the financial burden on homeowners.
In other legislative news, State Senate Minority Leader Brian Jones has used a recent DUI case as a catalyst for introducing a bill aimed at scaling back California’s sanctuary law.
The case concerns Oscar Eduardo Ortega-Anguiano, who was convicted of causing the deaths of two Orange County teenagers while driving under the influence and who may be released early after serving only three years of a 10-year sentence.
Jones has blamed California’s sanctuary policies and lenient approach to crime for the situation, asserting that his proposed legislation would enhance cooperation between local law enforcement and federal immigration authorities on serious crime cases.
Furthermore, newly appointed U.S. Attorney for the Central District of California, Bill Essayli, expressed intentions to prosecute Ortega-Anguiano, while Governor Gavin Newsom has pledged to coordinate with ICE on this matter.
In a significant economic update, California has now become the fourth largest economy in the world with a Gross Domestic Product (GDP) of $4.1 trillion, surpassing Japan and ranking only behind the United States, China, and Germany.
image source from：https://voiceofsandiego.org/2025/04/25/sacramento-report-rage-over-states-fire-insurance-market-sparks-lawsuits/
