California’s FAIR Plan was established in 1968 as a temporary safety net for homeowners to find coverage until a traditional insurance carrier becomes available. (Credit: Lightfield Studios/Adobe Stock)
A pair of antitrust lawsuits filed in Los Angeles County on April 18, accuse several major California insurance carriers of conspiring to force homeowners onto the state’s FAIR Plan.
The suits allege that these insurers, which include State Farm, Farmers and the other top insurers in the state, colluded to cancel existing policies in the Pacific Palisades, Malibu and Altadena areas and refused to write new policies in order to drive homeowners toward the state's insurer of last resort.
California’s FAIR Plan was established in 1968 as a temporary safety net for uninsured homeowners to find coverage until a traditional insurance carrier becomes available. The FAIR Plan is not governed by the state or funded with public money. It is a syndicated fire insurance pool that all insurers licensed to conduct P&C business in the state pay into according to their market share.
FAIR Plan policies generally come with higher premiums and lower coverage limits than traditional policies.
The new suits, which were filed by Larson LLP and Shernoff Bidart Echeveirra LLP, respectively, allege the lower coverage limits provided to those who had no choice but to get a FAIR Plan policy left many homeowners wildly underinsured during January’s wildfires.
A statement from Larson LLP about the suits states: “At the time of the January wildfires, the [FAIR] plan had significantly inadequate reserves to cover a catastrophic wildfire – funding levels that were determined by the insurance companies as the only voting members of the FAIR Plan’s Governing Committee. The California Department of Insurance agreed in 2024 to allow insurers to pass 50% or more of any additional funds required for coverage to customers in unaffected areas in the form of higher premiums, further incentivizing the insurers’ push to force homeowners onto the FAIR Plan."
The first suit (Todd Ferrier et al. v. State Farm Group et. al.) consists of homeowners who found they were underinsured under their more expensive FAIR Plan policies. According to the statement from Larson LLP, the gap between these homeowners’ actual property losses from the LA wildfires and the limits of their policies amounted to millions of dollars that would have been covered under their previous, dropped policies.
The second lawsuit (Anthony Canzoneri v. State Farm et. al.) was filed on behalf of a class of insureds who were allegedly “forced to pay exorbitant rates for inferior coverage after the insurers’ misconduct forced them to obtain limited coverage from the FAIR Plan.”
Larson LLP said that the homeowners represented in these suits are seeking compensatory and treble damages and an injunction preventing insurance companies from “engaging in further anti-competitive behavior.”
The FAIR Plan has dealt with its share of legal trouble lately. Earlier in April, a suit was filed against California’s FAIR Plan by ten policyholders for smoke claims they allege were illegally denied after the LA wildfires.
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