Two law firms representing California homeowners have accused several of the state’s largest home insurance companies of working together to eliminate standard property policies, forcing customers onto the state’s Fair Plan.
These allegations are part of two class-action lawsuits filed by Larson LLP and Shernoff Bidart Echeverria LLP. The companies involved write about 75% of California’s home insurance policies.
One lawsuit claims that insurers reduced coverage in Pacific Palisades, Malibu, and Altadena by canceling existing policies and refusing to offer new ones.
This left homeowners with no option but the Fair Plan, which provides significantly lower coverage limits.
As a result, the policyholders were underinsured during the large wildfires in Los Angeles in January.
According to the lawsuit, these homeowners suffered millions of dollars in uncovered losses that their previous policies would have covered.
The second lawsuit focuses on homeowners who paid higher premiums for Fair Plan policies but received reduced coverage. The lawsuits argue that the insurers’ alleged coordination led to both higher prices and lower-quality protection.
Before 2023, insurers competed for customers in these areas. The lawsuit cites State Farm as an example, noting that the company expanded its market share in Pacific Palisades and Malibu between 2017 and 2022.
During this period, State Farm gained customers by offering lower prices for comparable coverage and held about 25% of residential policies in Palisades by 2022.
This competitive market shifted in January 2023 when policyholders found no insurers willing to offer coverage through standard channels.
Despite a history of uninterrupted coverage, these regions became areas without access to admitted-market policies. The lawsuit argues that these customers, who often pay higher premiums, are especially profitable for insurers.
Once the alleged agreement between carriers took effect, homeowners went from receiving offers for more than $3 mn in coverage to receiving no offers at all.
The lawsuit claims this occurred even though customers were willing to pay more to keep their coverage.
The policyholders argue that the only plausible explanation for the sudden withdrawal of insurers is coordination among carriers to move policies to the more expensive Fair Plan.
This shift allowed insurers to continue collecting premiums from California consumers while lowering their risk exposure.
The lawsuits further allege that the insurers agreed to let these homeowners move as a group into the Fair Plan, which is managed collectively by property insurers.
As a result of this alleged plan, the Fair Plan recorded an 85% increase in policies from Pacific Palisades between September 2023 and September 2024. During the same period, the Fair Plan’s total exposure grew by 61%.
Stephen G. Larson of Larson LLP stated that California’s antitrust and unfair competition laws exist to prevent the kind of coordination described in the lawsuits, which left homeowners without access to competitive insurance products during the recent wildfire losses.
