Published by REALTOR.com | April 22, 2025
The lawsuit claims the homeowners found themselves underinsured with more expensive policies.
A group of Los Angeles residents who lost their homes in the January wildfires launched a lawsuit against major insurers for dropping fire coverage.
The 14 families, who lost their homes in the fires, have slammed the insurance companies and accused them of violating California’s antitrust and unfair competition laws.
In the lawsuit, obtained by Realtor.com®, they claim that in early to mid-2023, the companies, including State Farm and Farmers, “began to implement their scheme to terminate existing property policies.”
It also accuses the companies of coordinating to “cancel, stop renewing, and refuse to sell new property policies to homeowners in the Palisades, Malibu, and Altadena” areas.
They allege that after their fire coverage was dropped, and when they tried to get coverage elsewhere, they were repeatedly denied by other companies, but all of the carriers referred the plaintiffs to the California FAIR (Fair Access to Insurance Requirements) Plan, an insurer of last resort, for coverage.
State Farm, Farmers, as well as California’s insurance commissioner, have not responded to a request for comment.
“Rather than competing with each other to sell insurance in these areas, even if they had to charge more money, they didn’t do that,” Robert Ruyak, attorney for the plaintiffs, told Realtor.com.
“They realized that they could, by working together and all refusing to compete with each other for those policies, they could force everybody into this other plan that they jointly managed and owned and do better.”
What is the California FAIR Plan?
The California FAIR Plan started in 1968 as a means for homeowners to get insurance coverage when they’ve been denied by traditional carriers. It’s not considered a state agency. Rather, all licensed property and casualty insurers are members of the FAIR Plan and contribute to the reserves used to pay out claims. It also collects premiums from customers.
The suit claims the plan’s policies are “written to cover much less than a standard residential insurance policy.” It also claims plan rates are “higher than traditional insurance policies.”
Ruyak shared the story of one family that had full coverage for $3.5 million and was paying about $4,000 for a regular insurance policy, but when they were dropped by their carrier and forced to go to the California FAIR Plan, “it went up to $8,500 and the coverage was less”—it did not included contents. Coverage limit for the FAIR Plan is capped at $3 million for residential properties.
Overall, real estate losses from just the Palisades and Eaton fires are estimated to amount to more than $30 billion.
