Two lawsuits filed in Los Angeles are raising eyebrows as they accuse major home insurance companies of working together to limit coverage in areas prone to wildfires in California. This situation is pushing many homeowners toward the state’s expensive and minimal FAIR Plan. The lawsuits argue that this coordinated effort breaks California’s antitrust and unfair competition laws, as the FAIR Plan has become overwhelmed with policyholders, more than doubling to 560,000 since 2020. The plan is now facing significant losses, estimated at $4 billion from fires in January alone.
Jeff Jones, a managing partner at Insurance Office of America, commented on the lawsuits, saying they highlight a disconnect between what the public expects and the realities of the insurance market. He emphasized that insurance companies cannot continue to lose money and remain viable. Instead of relying on litigation to force insurers to cover wildfire losses, he suggested focusing on prevention and mitigation strategies, like strengthening homes and creating defensible spaces around properties.
Jones, who has experienced wildfires firsthand, warned that the extent of destruction is often underestimated. He noted that once a fire starts, especially with strong winds, it can quickly escalate, turning homes into total losses. Aaron Cohen, another broker at Insurance Office of America, added that the conversation should focus more on how to measure and reduce risks associated with wildfires.
Both brokers believe that lawsuits may not effectively address the insurance crisis. They pointed out that during the COVID-19 pandemic, courts did not mandate payouts because the funds simply weren’t available. They fear that wildfire risks are becoming just as uninsurable without serious efforts to mitigate them.
Jones stressed the importance of resilience and mitigation efforts, urging homeowners to prioritize changes that can protect their properties from wildfires. He believes that focusing on practical solutions is where the real progress can be made.
As the situation develops, it remains to be seen how these lawsuits will impact the insurance landscape in California and whether they will lead to meaningful changes in how wildfire risks are managed.