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Two lawsuits filed in Los Angeles County Superior Court accuse California home insurers of colluding to force homeowners into the state's insurer of last resort, the California FAIR Plan Association. The lawsuits claim that insurers, including State Farm, Farmers, and Mercury, engaged in unfair competition and violated the Cartwright Act, a state law against trade restraints and price-fixing. The lawsuits allege that insurers canceled policies in fire-prone areas like Pacific Palisades and Altadena, leaving homeowners with no choice but to join the FAIR Plan, which offers limited coverage at higher premiums.
The lawsuits, as reported by the Los Angeles Times, claim that insurers collectively profited billions by reducing their liabilities while charging higher premiums. The FAIR Plan, established by the California Legislature in 1968, is operated by the state's licensed insurers, who share in its profits and losses. By moving homeowners to the FAIR Plan, insurers allegedly avoided state review for rate increases.
The lawsuits, filed by Larson LLP and Shernoff Bidart Echeverria LLP, include a proposed class action seeking compensation for higher premiums and another seeking damages for inadequate coverage during the January wildfires. The plaintiffs argue that meetings of the FAIR Plan's governing committee and trade groups facilitated the alleged collusion, although no written documentation from these meetings is provided.
Insurers deny collusion, stating that their actions were a response to increasing costs and wildfire risks. Legal experts suggest proving collusion will be challenging, as insurers may argue they acted in their economic self-interest. The discovery process, including document requests and depositions, will be crucial in the litigation.