Lawsuits Claim Major Insurers Conspired to Force Homeowners into the FAIR Plan
California Insurers: Two lawsuits recently filed in Los Angeles accuse major home insurance companies, including State Farm, of colluding to limit coverage in California’s wildfire-prone communities. According to the plaintiffs, this alleged scheme aimed to push homeowners into the state’s FAIR Plan, a last-resort insurance option offering limited coverage and exorbitant premiums.
The lawsuits target 25 major insurers controlling 75% of California’s home insurance market. The plaintiffs argue that in 2023, these companies dropped coverage or halted issuing new policies in neighborhoods highly vulnerable to wildfires. Notably, areas like Pacific Palisades and Altadena, which were devastated in the January wildfires, are named in the lawsuits. The fires destroyed nearly 17,000 structures and claimed at least 30 lives. As a result, many homeowners have been forced into the FAIR Plan, leaving them underinsured and struggling to rebuild their homes and lives.
Related: State Farm’s California Emergency Rate Request Dropped to 17%
Allegations of Illegal Collusion and Market Manipulation
Michael J. Bidart, the attorney representing the homeowners, stated, “Insurance provides homeowners with peace of mind and essential support after disasters. By colluding to push plaintiffs into the FAIR Plan, insurers have profited from high premiums while depriving homeowners of the coverage they needed to recover from disasters like the January wildfires.”
This legal action comes amid a broader crisis in California’s insurance market. In 2023, several insurers increased rates, limited coverage, or entirely withdrew from the state, citing the growing threat of wildfires and other natural disasters. With these risks increasing due to climate change, many insurers claim they can no longer accurately price coverage for properties in vulnerable areas. California Insurers
Related: Southern California Edison’s $925M Rebuilding Plan After LA Wildfires
Growing Struggles and Increased Reliance on the FAIR Plan
The FAIR Plan serves as a safety net for homeowners who cannot obtain private insurance due to high-risk conditions. As of March 2025, over 555,000 homes were covered under the FAIR Plan, a sharp increase from 2020. However, the plan offers basic coverage, with premiums far higher than those of traditional insurers. This limited protection leaves many homeowners at risk, especially when dealing with the financial aftermath of natural disasters.
Critics argue that insurers are pushing homeowners into the FAIR Plan to limit their own financial responsibility. In February 2025, California’s top insurance regulator ordered insurers to contribute $1 billion to the FAIR Plan to cover claims from the LA wildfires. However, insurers will only have to absorb half of this cost, with the remaining burden shifted onto policyholders. California Insurers
Efforts to Regulate California’s Insurance Market
California’s regulatory approach is shifting to give insurers more flexibility to raise premiums in exchange for offering more policies in high-risk areas. Under new regulations, insurers can factor in climate change when setting their rates, and they can pass the costs of reinsurance onto consumers. This strategy aims to stabilize the market but also raises concerns about affordability and access to coverage for California homeowners.
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