Lawsuits Allege Insurers Colluded to Limit Coverage in Wildfire Areas

Sacramento, CAOver 200 insurers are facing antitrust and unfair competition lawsuits filed by homeowners in wildfire areas, including Pacific Palisades and Altadena. California homeowners claim that the insurers colluded over the past few years to limit coverage in these high-risk areas and the insurers formed a “group boycott” to terminate policies in Pacific Palisades, Malibu, Altadena and other fire-prone neighborhoods in early 2023 and then refused to write new policies. Homeowners were left with no choice: they were forced onto the FAIR plan, California’s more costly last-resort insurance plan. According to court documents, many homeowners suffered massive uncovered losses from January’s wildfire disaster.

Two Blockbuster Lawsuits

Two “blockbuster” lawsuits were filed in Los Angeles County Superior Court in April 2025 against the insurers, including State Farm, Farmers and Mercury that account for about 75 percent of California’s property and casualty insurance sales. According to the Los Angeles Times, the insurers are accused of unfair competition and violations of the Cartwright Act, a state law that prohibits agreements to restrain trade, fix prices or reduce competition.

One of the lawsuits — Todd Ferrier et al. v. State Farm Group et al. — claims the insurance companies, which had previously competed in the insurance market, “agreed, combined, colluded and conspired to eliminate competition between them related to their offering of property insurance coverage products, including fire insurance.” The lawsuit is a proposed class action filed by homeowners who lost their homes in the LA wildfires claim the insurers colluded in 2023 to “suddenly and simultaneously” drop coverage or halt writing new policies in neighborhoods like Pacific Palisades and Altadena and other fire-prone areas, which forced them onto the FAIR Plan, which seems like an oxymoron, and more like UNFAIR. The lawsuit seeks to have policyholders compensated for the alleged higher premiums they paid.

The second lawsuit, Anthony Canzoneri v. State Farm Group et al. — claims “the net result of this scheme was that these homeowners were each unjustly forced to pay thousands of extra dollars for deficient policies, while Defendants collectively reaped a windfall worth billions of dollars.” It includes all policyholders who obtained the FAIR Plan after January 2023, when the conspiracy supposedly began, seeks to compensate homeowners who experienced losses during the fires and then suffered further due to their alleged inadequate FAIR Plan coverage. Both lawsuits are asking for treble damages and an injunction preventing insurance companies from engaging in further anticompetitive behavior.

FAIR Plan

The California FAIR (Fair Access to Insurance Requirements) Plan was created in 1968 and is now run by the state’s licensed home insurers that share in its profits and losses. Every insurance carrier licensed to operate in the state of California must pay into the FAIR Plan proportionally, according to their market share. One attorney said that, at the time of the January wildfires, the 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. In 2024, the California Department of Insurance allowed insurers to pass 50 percent or more of any additional funds required for coverage to customers in unaffected areas in the form of higher premiums.

The FAIR Plan was designed to offer insurance to property owners who cannot get coverage due to wildfire or other risks. The Plan provides limited coverage compared to traditional insurance, and payouts are capped at $3 million. On average, premiums are more than double the cost of a typical home insurance policy in the state. By moving homeowners onto the plan, the insurers would profit from higher premiums, while being exposed to fewer losses due to its limited policies. Although it is designed as a temporary option until California homeowners can find permanent coverage, more than 555,000 home policies were on the FAIR Plan as of March 2025, which has more than doubled in five years.

The lawsuits claim that this plan resulted in an effective rate increase without the insurers having to undergo a state review, and it has left hundreds of homeowners underinsured and unable to rebuild after the fires. The FAIR Plan will likely have to pay out around $4 billion in claims following the January fires.

Defendants’ Response

The insurance industry has defended itself, with the American Property Casualty Insurance Assn., (APCIA) calling the collusion allegations “meritless claims”. Both lawsuits assert that the collusion and boycott were carried out through meetings of the FAIR Plan’s governing committee and subcommittees, and by meetings of the APCIA. In a statement, APCIA said it has a legal right to voice industry concerns to the government and that it “complies with all applicable antitrust laws.” Further, it said the lawsuits are meritless, and the association monitors to ensure its members comply with the state’s antitrust laws. The president of the Personal Insurance Federation said there was nothing collusive about insurers’ behavior. Rather, it was a logical consequence of being unable to get adequate rate increases as costs and wildfire danger have increased.

An investigation into State Farm General has begun. State Farm General said it is cooperating with the department and its market-conduct exam process. (Past exams have recovered hundreds of millions of dollars in claims for survivors.)