Major insurance company accused of illegal scheme to profit off policyholders: 'Race to the bottom'
What's happening?
On January 7, what would become a historical series of wildfires began burning in the Pacific Palisades neighborhood.
Within a day, the blaze had consumed several homes. It wasn't fully extinguished until January 31, leaving a trail of destruction and fatalities in its wake. On January 9, NPR questioned whether insurance companies had "enough money" to cover the slew of upcoming claims.
State Farm is the largest insurer in California, and on January 10, Newsweek covered a statement issued by the insurer. Although the language has since changed, an archived copy matched what was quoted in the article.
"We are here for our customers to help begin the process of recovery," it read in part. "We want our customers to know that, when it is safe to do so, they can and should file a claim."
In June, several California policyholders jointly filed suit against State Farm, alleging that the firm intentionally and "grossly" left them underinsured.
Plaintiffs further alleged the company engaged in a "multifaceted illegal scheme," designed to "reap enormous illicit profits by deceptively misleading over a million homeowners," per the complaint.
Through a series of pricing initiatives and other tactics, the complainants assert that State Farm created a "race to the bottom" for rates, aggressively seizing the largest share of California's market.
"Lower coverage limits correspond to more attractive premium rates, but leave homeowners unwittingly exposed to serious underinsurance … This has severely undermined plaintiffs' efforts to rebuild their lives in the aftermath," attorneys for the plaintiffs wrote.
Why does the California homeowners' lawsuit matter so much?
While they're not technically "weather," wildfires are considered a form of extreme weather, as the extent of the damage in Los Angeles demonstrates.
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The Los Angeles fires were largely caused by a dry winter, exacerbated by rising temperatures and anomalous weather patterns, according to Climate.gov.
As the planet heats and seas warm, all forms of extreme weather will intensify and occur more frequently.
To add insult to injury, many California homeowners experienced delayed claim processing, if they were able to secure home insurance at all.
On top of that, State Farm intends to raise rates in California by 30% to 40% across the board.
What's being done about the home insurance crisis?
In addition to the lawsuit filed in June, homeowners in Eaton sued insurers for similar reasons in April, seeking relief through the court system.
Homeowners were caught off guard by the devastating wildfires, which is why it's important to remain aware of critical climate issues and stay prepared.
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