Property owner sued California insurance company for suspected “collusion” after wildfire
A group of homeowners affected by January wildfires are suing major California insurance companies, including the state’s largest state farm, allegedly violating California’s antitrust and unfair competition laws. The lawsuits followed others, involving insurers dealing with the consequences of the Eaton and Palisades fires, including targeting insurance commissioner Ricardo Lara and the California Fair Plan (particularly about smoke damage), the state’s last resort to its suffering.
Panel complaints and demands for jury trials were filed in the Los Angeles Superior Court on April 19 that in a “evil plot” the major insurers conspired to “eliminate competition between them”, thus “deliberately and systematically” forcing homeowners to accept California’s fair plan.
On the same day, the lawyer filed a separate class action lawsuit on the same matter.
“Insurance is a product that homeowners hope to never need, but a key help in relying on peace of mind during normal times and rebuilding in the aftermath of disaster,” Michael J. Bidart of Shernoff Bidart Echeverria LLP, one of the law firms representing the plaintiffs, said in a statement. “The complaint claims that by collusion to bring plaintiffs and many people to their fair plan, the defendants gained benefits from the benefits of high premiums while depriving homeowners of coverage so much that they were ready, willing and able to buy to ensure they recover after a disaster like the January wildfire.”
Representatives of major insurance companies meet regularly to “discuss what we consider to be a market issue,” including the management of fair plans. “It is clearly a consistent attempt from the entire industry to drive lower interest policies for people in high-risk areas while continually charging higher premiums from everyone else.”
The fair plan was established after fleeing the need for insurance companies to emphasize the need for a new type of carrier. The aim is to provide insurance options for California homeowners living in places where open market carriers refuse to cover, including in communities prone to wildfires.
Fair Plans have their own reserves, but are backed by California-licensed real estate insurers that must pay claims when fairly borrowing their funds. The plan has proven to be critical due to the increasing number of catastrophic fires in the state, including the loss of $12.5 billion in insurers in 2018 when Camp Fire destroyed the town of Paradise.
But fair plans are already overwhelmed with many insurers removing coverage for homeowners in fire-risk areas. The number of fair plan policy holders has soared from about 200,000 residential policy holders in 2020 to nearly 560,000 as of March 2025.
In response, Lara signed a policy last year to allow fair plans to assess $1 billion in residential claims for its member companies. These private insurers can then temporarily add surcharges to the premiums paid by their policy holders to recover 50% of that, or $500,000.
The premium increase applies to homeowners across California, not just areas that are prone to occur. That is, Lala must approve these surcharges separately.
Opponents of the policy called it an industry “bailout” that burdens consumers.
“Homeowners across the state shouldn’t be in trouble for the Los Angeles fires because insurers abandon these neighborhoods and dump their homeowners,” Carmen Balber, executive director of the consumer watchdog told The Times in January.
The new lawsuit alleges that the state’s top insurers — those that are legally required to support fairness — collude to cancel plans, leaving homeowners insured under fair insurance premiums, which are higher than most plans on the commercial market but are limited to a lower coverage of $3 million. The plaintiff is seeking three times the damages.
“This is exactly what action we need to take to break something that is obviously similar to a cartel,” the court said.
Representatives from State Farm and Ulster did not respond to requests for comment as of publication.
Hilary McLean, a spokesman for the Fair Plan, told the Times that “Although the California Fair Plan was not named in these lawsuits, the Fair Plan did not comment on proactive litigation.”
“The Insurance Department is not involved in this matter as a party and cannot comment on the lawsuit. Our focus is, and will always protect California consumers,” Gabriel Sanchez, who represents the office of Ricardo Lara, said in an email.
Earlier this month, state farms proposed 17% higher emergency tax rates — a 22% drop from the initial requirement for state officials in February — it said it was “necessary to “help stabilize the financial situation of state farm generals” and prevent carriers from “further limiting” their ability to provide home insurance in California.
Meanwhile, many people who lost their homes in the Los Angeles fires called for a formal investigation of major insurance providers, saying delays and denials have put them in a terrible financial strait and housing difficulties.
Time worker Laurence Darmiento contributed to the report.
