Homeowners sue insurers, allege boycott to push substandard fire coverage

Altadena and Pacific Palisades homeowners have accused insurance companies in two lawsuits of refusing to insure their homes en masse, and pushing them to the California FAIR Plan for substandard fire coverage at inflated rates.

The lawsuits accuse State Farm and more than 100 other insurance carriers of colluding to cancel policies and refusing to write new ones, in violation of the Cartwright Act and the Unfair Competition Law. It says the defendants notified the plaintiffs mere months before the January wildfires that their property insurance policies would not be renewed. Each of the plaintiffs say they suffered the loss of structures and personal properties in the wildfires.

"As part of this conspiracy, defendants and their co-conspirators agreed to jointly establish a group boycott to withhold insurance coverage and property policies they would otherwise individually offer--and had offered in the past--to owners seeking to obtain or maintain sufficient insurance coverage necessary to rebuild or replace their homes in the event of a catastrophic fire," reads a copy of the complaint prepared for filing Monday by Michael J. Bidart of Shernoff Bidart Echeverria LLP and Stephen G. Larson of Larson LLP.

"Through their boycott, defendants caused plaintiffs to pay premiums that were above competitive levels for policies that provided severely limited fire coverage capped at a maximum of $3 million, regardless of the construction costs required to rebuild plaintiffs' destroyed structures, their losses of personal property contents, their loss of use expenses, and other previously insured losses," the complaint continues.

"The complaints allege that, by colluding to push plaintiffs and so many like them to the FAIR Plan, the defendants have reaped the benefits of high premiums while depriving homeowners of coverage that they were ready, willing, and able to purchase to ensure that they could recover after a disaster like January's wildfires," Bidart said in a statement.

The two firms jointly filed a putative class action against the insurance carriers as well, alleging that their actions subverted the FAIR Plan to enhance their profitability while shifting fire liability exposure onto the consumers.

California's FAIR Plan - short for Fair Access to Insurance Requirements Plan - is a state-mandated insurance program designed to provide basic property insurance to homeowners and businesses who can't get coverage through the regular insurance market, usually because they live in high-risk areas for wildfires or other disasters.

The Palisades and Eaton Canyon (Altadena) wildfires tore through parts of Los Angeles County for several days in January, leaving behind scorched landscapes, damaged homes, and significant financial tolls. Combined, these fires led to the destruction of more than 15,000 structures, the evacuation of over 100,000 residents, and an estimated $28 billion in insured losses.

Observers have questioned whether the FAIR Plan was robust enough to cover claims stemming from the January wildfires. Consumer Watchdog last week sued the California Department of Insurance to make it stop insurers from imposing millions of dollars in surcharges on California FAIR Plan policyholders in the wake of the Palisades and Eaton fires. Altadena and Palisades residents sued the California FAIR Plan Association earlier this month, claiming insurance bad faith and breach of contract for denying or underpaying smoke damage claims.

State Farm asked California Insurance Commissioner Ricardo Lara in February to approve rate increases ranging from 15% for renters and condominium unit owners to 38% for rental dwellings. A letter to the commissioner signed by State Farm CEO Dan Krause and other executives states the company has received 8,700 claims stemming from the January wildfires and has paid over $1 billion to customers as of Feb. 1. It does not specify which of the wildfires those payments stemmed from.

Two Southern California Assembly members have introduced a bill designed to stabilize California's FAIR Plan. Assembly Bill 226 would allow the FAIR Plan, with the permission of the insurance commissioner, to issue "catastrophe bonds" to keep the fund solvent. Estimates for the plan's exposure range into the billions of dollars, topped by a $24 billion estimate published by the San Francisco Chronicle.

Last December, Lara announced a new regulation allowing reinsurance for ratemaking, and requiring insurance carriers to incrementally increase coverage in risky areas.

State Farm's proposed rate hike does not address the root causes of access to coverage, affordability and risk, according to Derek S. Chaiken of Merlin Law Group.

"The FAIR Plan was intended to be a temporary safety net for homeowners unable to obtain coverage through the private market," Chaiken said, when asked to comment about the antitrust lawsuit. Merlin Law Group is also involved in litigation stemming from the wildfires.

"If the allegations in the lawsuit are accurate, it raises important questions about how insurers determined which homeowners would end up on the FAIR Plan, and whether those decisions were made based on individual underwriting or reflected a broader, coordinated pullback from high-risk areas. This issue is particularly relevant as the Net Cost of Reinsurance Ratemaking Regulation is set to take effect," Chaiken continued.

The class action is: Anthony Canzoneri, individually, and as Trustee of the Anthony Canzoneri Revocable Trust of 2008, and on behalf of others similarly situated, v. State Farm Fire & Casualty Co., et al. (L.A. Super. Ct., filed April, 2025). The antitrust action is: Ferrier et al., v. State Farm Fire & Casualty Co., et al., (L.A. Super. Ct., filed April, 2025).