LA lawsuit accuses insurance companies of conspiring to drop coverage “suddenly, simultaneously” in California’s fire-prone areas
Two lawsuits filed in Los Angeles alleges that major home insurance companies conspired to limit coverage California communities at high risk of wildfires And enforce homeowners on the state’s last resort insurance plan, offering basic coverage and high premiums.
According to one of the lawsuits filed last week, insurance companies, including 75% of California’s household insurance market, and 24 other companies, including 75% of California’s household insurance market, were part of an “illegal plan” in violation of California’s antitrust and unfair competition laws.
The lawsuit states that businesses will work together in 2023 to “suddenly” drop or stop coverage “suddenly and simultaneously” in fire-prone areas, including neighborhoods such as Pacific Palisades and Altadena.The wildfires of JanuaryIt destroyed nearly 17,000 structures and killed at least 30 people. This forced the fair plan as hundreds of homeowners offered $3 million limited cupping and struggled to rebuild after the fire as they were not insured.
Other lawsuits include all policyholders who have obtained a fair plan since January 2023, when the conspiracy allegedly began, the lawsuit states.
“Insurance is a product that homeowners hope never needs, but in normal times we rely on them for peace of mind and rebuilding after a catastrophe,” said Michael J. Bidart, representing homeowners, in a statement. “The complaint argues that by conspiring to support a fair plan, the defendant enjoyed the benefits of high premiums while robbing the report that he was prepared and willing to recover after a disaster like the wildfire in January.”
The lawsuit comes when California is strugglingContinuous Insurance CrisisWhere are the companies?Rate of increaselimit coverage or pull it entirely from areas susceptible to wildfires and other natural disasters. In 2023, several major insurance companies alsoPaused or restrictedNew businesses in the state say they can’t really price real estate risks as wildfires become more common and destructiveClimate change.
The American Real Estate Victim Insurance Association, the largest national trade association representing home, automobile and business insurance companies, said it is in compliance with the state’s antitrust laws and is monitoring its members to do the same.
“These cases will focus on reverse logic, advancing valueless claims and solving challenges in the California insurance market,” said Stef Zielezienski, the group’s chief legal officer.
The state Department of Insurance said it was not involved in the lawsuit, but its focus was on protecting consumers.
“Californians deserve a system that works. The decisions are made public, the rates reflect actual risks, leaving no one without options,” department spokesman Gabriel Sanchez said in a statement.
State Farm, California’s largest home insurance company, has a policy of around 1 million and did not respond immediately to requests for comment.
A fair plan is an insurance pool paid by all major private insurers. The plan issues policies to those who cannot get private insurance because their property is deemed too dangerous to insure. With high premiums and basic coverage, the plan is designed as a temporary option until homeowners can find permanent coverage, but more Californians are more dependent on than ever. As of March, there were over 555,000 housing policies for fair plans, more than doubled in 2020.
The complaint also alleges that the insurers were pushing policyholders into a fair plan, as they do not have to bear all financial liability to maintain the plan. When state top insurance regulators ordered insurance companies in FebruaryProvides $1 billionHe has allowed half of the costs to be recovered from policyholders across the state in a fair plan to help pay claims related to the LA wildfires. Another lawsuit was filed last week.Block cost shift restrictions.
California is in the process of implementing various new regulations to provide insurance companies with more latitudes in exchange for issuing more policies in high-risk regions. That includes regulations that allow insurance companiesConsider climate changeWhen setting prices and allowing California consumers to take over the costs of reinsurance.
This story was originally introduced Fortune.com