Two lawsuits filed in Los Angeles claim major home insurers conspired to restrict coverage in wildfire-prone California communities, pushing homeowners onto the state’s high-cost, bare-bones FAIR Plan, a move that’s drawing questions from brokers who say the legal action may misunderstand both risk and economics.
The lawsuits, filed in Los Angeles, claim this coordinated effort violates California’s antitrust and unfair competition laws. Plaintiffs argue that the FAIR Plan offers inferior coverage at a higher cost and has become overwhelmed as insurers exit the wildfire market — its policyholder count has more than doubled to 560,000 since 2020. The plan is now facing an estimated $4 billion in losses from the January fires alone.
Jeff Jones, managing partner at Insurance Office of America, while not commenting on the specifics of this litigation, said the lawsuits reflect a larger disconnect between public expectations and market realities.
“There’s a disconnect in California with some well-meaning consumer groups who don’t understand that insurance companies can’t continuously lose money and stay in business,” Jones said. “Instead of forcing carriers to subsidize wildfire losses through litigation, we should be focusing on prevention and mitigation—on hardening homes, building defensible zones, and using ember-resistant vents. Government also has a significant part to play in prevention and response.”
Jones, who has personally evacuated during wildfires and supported clients through total-loss events, warned that the scale of destruction is often underestimated. “Once a house catches fire and you get 90 miles an hour winds coming through, it becomes a blast furnace. Thousands of homes have shown us that story already.”
Aaron Cohen, a commercial insurance broker at Insurance Office of America, said the conversation should center on how risks are quantified and mitigated.
“With tornadoes for example, you could just lose your roof or sustain some damage, which carriers can better address with a deductible. With wildfires, the probable maximum loss is often 100%,” Cohen said. “If it hits your home, it’s likely a total loss.”
Both brokers emphasized that litigation may do little to solve the insurance crisis. “We saw this during COVID,” Jones said. “The courts and legislatures didn’t mandate pandemic payouts because the money just wasn’t there. Wildfire risk is becoming just as uninsurable without serious mitigation efforts.”
Jones added that brokers and homeowners alike need to refocus on resilience. “What I’m spending time on is mitigation—changing vents, clearing defensible space. That’s where the real solutions lie.”
