California Wildfire Lawsuits Uncover Disaster
Two new lawsuits filed in Los Angeles are shining a spotlight on a worsening insurance crisis in California. Complaints allege that major home insurance companies, including State Farm, have colluded to limit coverage in wildfire-prone communities, forcing homeowners onto the state-run FAIR Plan. This last-resort plan offers only basic coverage and comes with high premiums, leaving thousands of policyholders underinsured and financially vulnerable after recent disasters.
Allegations of a Coordinated Industry Pullout
According to one of the lawsuits, insurers engaged in an “illegal scheme” by simultaneously withdrawing or halting new business in fire-prone areas beginning in early 2023. The lawsuit, filed on behalf of homeowners who lost their homes in the devastating January wildfires, claims this coordinated retreat violated California antitrust and unfair competition laws. The wildfires destroyed nearly 17,000 structures and resulted in at least 30 fatalities, leaving survivors struggling to rebuild with insufficient coverage.
The second lawsuit seeks broader damages for any policyholder forced onto the FAIR Plan after January 2023. The FAIR Plan caps residential coverage at $3 million, which for many homeowners falls far short of the cost to replace or rebuild homes in California’s inflated real estate market.
“By colluding to push plaintiffs and so many like them to the FAIR Plan, the defendants have reaped the benefits of high premiums while depriving homeowners of the full coverage they were ready, willing, and able to purchase,” said attorney Michael J. Bidart, representing the homeowners (KCRA News).
The FAIR Plan: Meant to Be Temporary, Now a Lifeline
The California FAIR Plan is an insurance pool funded by private insurers and designed for homeowners who cannot attain traditional coverage. While intended as a short-term solution, the plan has seen explosive growth. As of March 2025, over 555,000 California homes are insured under FAIR—more than double the number in 2020.
One reason insurers may be driving homeowners toward FAIR is that they do not bear the full burden of financial liability for FAIR payouts. After California’s top insurance regulator ordered insurers to contribute $1 billion to help the plan cover wildfire-related losses, a controversial provision allowed half the cost to be passed onto policyholders statewide. This sparked yet another lawsuit, challenging the legality of the surcharge.
Industry Response and Regulatory Challenges
Insurers argue that their decisions stem from the increasing difficulty of pricing risk due to climate change. As wildfires grow in frequency and intensity, insurers claim they must adjust their exposure to stay solvent. The American Property Casualty Insurance Association called the lawsuits “meritless,” stating that they comply with California antitrust laws and work to solve long-term challenges in the insurance market.
Meanwhile, California’s Department of Insurance has introduced regulations to encourage companies to return to high-risk areas. These include allowing insurers to factor climate risk and reinsurance costs into premiums—a move that may raise rates across the board but potentially restore access to coverage for at-risk homeowners.
“Californians deserve a system that works—one where decisions are made openly, rates reflect real risk, and no one is left without options,” said Gabriel Sanchez, spokesperson for the department (KCRA News).
What This Means for Policyholders
At the Chad T. Wilson Law Firm, we’ve closely monitored how insurance carriers respond to climate-driven disasters—and we’ve consistently seen a troubling trend: delayed claims, dropped policies, and a growing reliance on state-backed, bare-bones insurance plans.
The case in California is just one part of a national issue. From wildfires in the West to hurricanes in the Gulf and hailstorms in the Midwest, property owners across the country are discovering that the insurance they thought would protect them no longer meets their needs.
If your insurance claim has been denied, delayed, or underpaid—or if you’ve been forced into a limited policy like a FAIR Plan—you are not without options. Our firm stands ready to challenge bad faith practices and ensure policyholders receive the full compensation they’re owed.
