Rage Over State’s Fire Insurance Market Sparks Lawsuits

California’s troubled fire insurance market has pushed increasing numbers of homeowners onto the state’s high-risk FAIR Plan. In San Diego alone, FAIR Plan coverage quadrupled over the last few years.

A pair of lawsuits filed against major insurers last week claim that was by design. 

Two lawsuits allege that the top 25 insurers conspired to eliminate standard insurance policies, in an effort to boost profits and shed risk. That left homeowners to seek coverage under the state’s last-resort insurance plan, which offers lower coverage at higher premiums. 

“By colluding together to cancel existing policies and refusing to write new ones, the insurers were able to force property owners onto the FAIR Plan,” the law firms who filed the suits said in a statement. 

One lawsuit represents Los Angeles homeowners who suffered damages from the Palisades and Eaton Fires in January. The other makes claims on behalf of hundreds of thousands of California homeowners “who were forced to pay exorbitant rates for inferior coverage after the insurers’ misconduct forced them to obtain limited coverage from the FAIR Plan,” the firm stated. 

Homeowners were cornered, with no choice but to accept less coverage while “defendants used the plan to raise, fix, maintain and stabilize premium prices for those thousands of consumers,” the complaint stated. 

The American Property Casualty Insurance Association, a trade association representing insurers, denied any wrongdoing by its members. Its chief legal officer, Stef Zielezienski, argued that the problem stems from “deteriorating conditions in the California property insurance market” and said the “suits defy logic (and) advance meritless claims.”  

How We Got Here

California established the FAIR Plan in 1968 as an insurer of last resort for properties in high fire risk areas that private insurers won’t cover. The plan offers homeowners a temporary safety net until they can get traditional insurance coverage, with the goal of reducing the number of people who depend on it. 

Instead, Fair Plan coverage has increased, as insurance companies have withdrawn from California after a series of catastrophic wildfires. Statewide, its policies doubled between 2020 and 2024. In San Diego County, they quadrupled during that time. 

The lawsuits claim insurance companies took advantage of the crumbling insurance market, using California’s high-risk pool to charge higher rates while insulating themselves from liability. 

The companies “turned the stopgap protective purpose of the FAIR Plan on its head,” the lawsuits stated. “It did so by subverting the FAIR Plan into an instrument to collectively enhance Defendants’ profitability while shifting vast amounts of fire liability exposure back onto consumers.” 

To help pay billions of dollars in claims from the L.A. fires, the FAIR Plan will impose a special charge of $1 billion on insurance companies, who will in turn pass $500 million onto homeowners, including those with traditional plans. Most policyholders in California will see an extra charge on their insurance bills. 

“As a coup de grace, the FAIR Plan has already announced that half of the losses incurred as a result of the wildfires will be charged back to the consumer marketplace,” the lawsuit stated. 

Could San Diego Homeowners Be Affected?

I contacted the law firms who sued the insurance companies to find out what these cases mean for San Diego homeowners on the high-risk state plan, but they didn’t respond. 

However, they argued in court filings that the alleged conspiracy could affect homeowners beyond those who lost property in the L.A. Fires. 

“A more hidden—but just as collectively injurious—aspect of Defendants’ scheme 

is the billions of dollars that have been siphoned from the pockets of homeowners who were 

spared from the recent wildfires, but are still paying inflated rates for deficient coverage,” the lawsuit on behalf of all FAIR Plan customers stated. 

San Diego County’s reliance on FAIR Plan policies has soared, as policies roughly quadrupled between 2020 and 2024, from 9,670 to 37,375. That’s the third highest number in the state, after Los Angeles and San Bernardino Counties. 

A year ago, I reported on State Farm’s decision not to renew thousands of policies in California, including 2,000 in San Diego. The affluent community of Rancho Santa Fe was one of the hardest hit, along with rural areas in Alpine, Chula Vista, Jamul, Lakeside and El Cajon. Some of those homeowners likely turned to the state high-risk plan when their policies expired. 

Whatever their outcome, the lawsuits highlight the problem that the state’s last-resort insurance plan has become the only option for hundreds of thousands of California homeowners. 

Also on the Fire Insurance Front 

 

The nonprofit Consumer Watchdog sued the California Department of Insurance and Commissioner Ricardo Lara last week, challenging the $500 million in surcharges that California homeowners will have to pay to help cover liability from the L.A. fires. 

Consumer Watchdog denounced the assessment as a “bailout” for insurance companies. It says the surcharges were announced without the opportunity for public comment and claims FAIR Plan statutes don’t allow companies to shift costs to consumers. 

A proposal to stabilize the FAIR Plan is moving forward. Assemblymember David Alvarez’ bill would authorize the FAIR Plan to request the California Infrastructure and Economic Development bank to issue bonds in cases where catastrophic events strain the plan’s ability to pay claims. It passed the Assembly floor earlier this month.  

By Deborah Sullivan Brennan | Apr. 25, 2025 | Voice of San Diego

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EDITOR'S NOTE: I had USAA for 26 years and never had a bit of trouble. But when I moved to Bonita and had horses, I was informed I would no longer be covered.

I picked up Farmer's Insurance and at no time filed a claim. The last few years it seemed that they were intent on cancelling my policy. They finally did because my fence touched my home. Any one else figure out how to keep your dogs in a back yard with an six foot opening separating it from your home?

I was told I could install chainlink fence. I thought briefly about putting in a masonry wall but that would be expensive considering they'd find a way to cancel me the next year.

Skip to the chase, I was cancelled.

NO ONE was writing policies.

Considering that they cancelled all the insurance up in Pacific Palisades a month or two before the fires burnt it down (6,831 structures destroyed and 973 damaged), I had to go with the only company writing policies: California Fair Plan. There is nothing fair about it.

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