California wildfire victims sue insurance giants for alleged collusion
Pranjal Chandra | Apr 23, 2025, 20:21 IST
( Image credit : AP )
California homeowners are suing major insurance companies, including State Farm and Allstate, alleging a conspiracy to deny coverage in wildfire-prone areas. The lawsuit claims insurers funneled homeowners into the California FAIR Plan, a less comprehensive and more expensive option. This action highlights a growing national crisis in the housing insurance market due to climate change and increasing natural disasters.
A group of California homeowners is suing some of the nation’s largest insurance companies, claiming they colluded to deny coverage in wildfire-prone regions and funneled customers into the California FAIR Plan, a limited coverage last-resort insurance pool with higher premiums and fewer protections.
The lawsuit, filed in Los Angeles County on Friday, alleges a “nefarious conspiracy” among companies including State Farm, Farmers, Berkshire Hathaway, Allstate, and Liberty Mutual. The homeowners argue that insurers participated in a “group boycott” refusing to write new policies or renew existing ones in high-risk areas to eliminate competition and offload risk.
The California FAIR Plan is a state-mandated insurer of last resort, funded and jointly operated by private insurance companies, not the government. While it’s meant to help homeowners who can’t find coverage elsewhere, critics say it offers inferior coverage and enables insurers to dodge liabilities.
Insurers named in the suit have so far declined to comment.
Ruyak alleges that all the defendants, who collectively run the FAIR Plan, agreed not to underwrite high-risk policies independently, ensuring that homeowners dropped by one company couldn’t turn to another.
This lawsuit comes amid a growing crisis in the U.S. housing insurance market, as climate change intensifies natural disasters. A 2023 NBC News analysis found that one in four American homes may soon face “climate-driven insurance shock.”
California, already reeling from back-to-back wildfire seasons, has seen insurers pull out or hike rates, leaving many residents vulnerable or without coverage.
The plaintiffs are demanding a jury trial and seeking treble damages or three times the amount of their losses. A separate class-action lawsuit filed the same day echoes many of the same accusations.
With both legal and regulatory scrutiny mounting, the future of home insurance in fire-prone areas could hinge on the outcome of these cases.
The lawsuit, filed in Los Angeles County on Friday, alleges a “nefarious conspiracy” among companies including State Farm, Farmers, Berkshire Hathaway, Allstate, and Liberty Mutual. The homeowners argue that insurers participated in a “group boycott” refusing to write new policies or renew existing ones in high-risk areas to eliminate competition and offload risk.
What is the FAIR plan?
Insurers named in the suit have so far declined to comment.
Ruyak alleges that all the defendants, who collectively run the FAIR Plan, agreed not to underwrite high-risk policies independently, ensuring that homeowners dropped by one company couldn’t turn to another.
The bigger picture: a national insurance crisis
California, already reeling from back-to-back wildfire seasons, has seen insurers pull out or hike rates, leaving many residents vulnerable or without coverage.
What's next?
With both legal and regulatory scrutiny mounting, the future of home insurance in fire-prone areas could hinge on the outcome of these cases.