Palisades and Altadena-area residents who lost their homes in the January wildfires are suing scores of top insurers for allegedly conspiring to cancel their existing property policies and to force homeowners into low-coverage California FAIR Plan policies.
The law firms Larson LLP and Shernoff Bidart Echeverria LLP filed two lawsuits in Los Angeles Superior Court last week on behalf of residents who lost homes in the deadly wildfires, alleging that multiple insurers, including State Farm and Farmers, conspired to cancel property policies and to collectively withhold coverage for those homeowners in order to force them into the California FAIR Plan.
“(The) defendants’ group boycott resulted in property owners … being unable to obtain property policies from any of the defendants and their co-conspirators, and left plaintiffs with only one non-competitive, highly expensive and inadequate option for coverage in the FAIR Plan, which charged plaintiffs excessive premium prices that were raised, fixed, maintained and stabilized by defendants, and systematically underinsured plaintiffs’ properties,” one of the lawsuits states.
The second lawsuit is a class action that makes similar allegations and seeks relief for hundreds of thousands of homeowners in the state who were “victims of defendants’ unlawful conspiracy to drive a vulnerable class of consumers out of lower-cost, higher-coverage fire insurance policies into higher-cost, lower-coverage policies.”
The private, for-profit companies’ cancellations and their collective actions to deny replacement coverage to homeowners led defendants to reap a windfall worth billions of dollars, according to the complaints that were filed April 18.
The FAIR (Fair Access to Insurance Requirements) Plan is a nonprofit insurer that was set up and managed by private insurers doing business in the state. The FAIR Plan has limited fire coverage that has been capped at $3 million regardless of the cost required to rebuild the customer’s home and value of personal property, according to the plaintiffs’ lawsuit. The complaint alleges insurers violated California Cartwright Act, the state's main antitrust law.
The defendants substantially shrunk their liabilities and exposure to underwriting or risk assessments by limiting certain homeowners’ options, according to the litigation. Meanwhile, the FAIR Plan lacked adequate reserve funds to cover catastrophic wildfires, the plaintiffs allege.
“After the fires, the gap between their actual property losses and the limits of their FAIR Plan policies amounts to millions of dollars that would have been covered under their previous, dropped policies,” the Larson LLP law firm reported.
But Stef Zielezienski, the chief legal officer for the American Property Casualty Insurance Association (APCIA), said the lawsuits are baseless.
“APCIA has, in California and throughout the states, consistently opposed the creation and expansion of state property residual plans such as the California FAIR Plan,” Zielezienski said in a prepared statement. “Insurers are ultimately on the hook for the liabilities of such plans. … APCIA fully complies with all applicable antitrust laws and has legal counsel monitoring every member call and meeting for that purpose. These suits defy logic, advance meritless claims, and we are going to focus on solving the challenges in the insurance market in California.”
The two lawsuits seek an injunction to stop the defendants from engaging in the alleged anti-competitive actions, compensatory damages for the plaintiffs’ losses, treble damages and reimbursement of attorney fees.
“We look forward to litigating these claims so plaintiffs can rebuild what was lost and also to end the group boycotts that we believe have tainted and upended the market for insurance in Los Angeles County,” plaintiffs’ attorney Stephen G. Larson said.