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San Francisco Chronicle
3 days ago
- Business
- San Francisco Chronicle
Three major California insurers accused of systematically underinsuring L.A. fire survivors in new lawsuits
A pair of new lawsuits accuse three of California's largest insurance companies of 'systematically' underinsuring homeowners via flawed cost estimation software, leaving survivors of the Los Angeles wildfires unable to rebuild. The suits, which followed a Chronicle investigation into the issue, were filed Thursday in Los Angeles Superior Court against USAA as well as the Interinsurance Exchange of the Automobile Club and CSAA, the two AAA-affiliated home insurers for California. They allege the three companies knowingly insured homeowners for far less than the rebuild value of their homes through their use of computer programs they'd known for decades were faulty, making it difficult if not impossible for those homeowners to rebuild. 'The carriers are not telling insureds that the number they're giving them is not even close to the ballpark,' attorney, Gregory Bentley, told the Chronicle Thursday. His firm, Bentley & More, filed the suit and represents the families in both cases. 'It's misrepresentation. It's fraud,' Bentley said. The allegations come months after the Chronicle published an investigation into how flaws in the software, called 360Value, and the way insurance companies use it have left many homeowners underinsured after wildfires. The story reported on examinations by the California Department of Insurance, including one into USAA, that found widespread underinsurance following 2015 and 2017 California wildfires related to the insurers' use of the tool. In response to the department's report, USAA agreed to pay more than $11 million back to homeowners and implement procedures to prevent future mistakes. Another investigation into CSAA, the AAA-affiliated insurer for northern and central California, led to more than $40 million in additional payments. USAA is the sixth largest home insurer in California as of 2023. CSAA is the third-largest, and the Interinsurance Exchange the eighth-largest. No insurer responded to a request for comment. Verisk, the creator of 360Value, is not a named party in either suit. A Verisk representative also did not respond to a request for comment. Industry representatives previously told the Chronicle that homeowners are responsible for selecting their own coverage limits and sometimes choose insufficient limits due to poor research or a desire to keep their premiums low. But the lawsuits allege that the homeowners relied on USAA and AAA's recommendations and the insurers' advice that the numbers were adequate. In one case, the complaint specifically alleges that AAA refused to allow a defendant to buy more insurance beyond what 360Value recommended. The Chronicle's investigation found that the 360Value tool can underestimate rebuilding costs and rely on incorrect information about a home, such as the wrong number of stories, leaving homeowners with coverage limits that are at times hundreds of thousands of dollars too low. Verisk representatives previously told the Chronicle that 360Value is simply 'an advisory tool' for insurers that attempts to make an objective analysis based off of millions of pricing data points. They noted there are many factors that can unexpectedly influence the cost of building, such as rapid inflation. The case against USAA alleges three families in the Pacific Palisades and one in Altadena were each signed up for policies ranging between $264 to $538 per square foot to rebuild their homes. However, initial estimates after the fire have put the true cost of rebuilding at $800 to $1,400 per square foot, according to the complaint. The two families suing AAA — one in Malibu and the other in the Pacific Palisades — claim their homes were insured for $278 and $342 per square foot, respectively, leaving both 'drastically underinsured.' Speaking generally, Dan Veroff, a San Francisco-based lawyer specializing in insurance cases, said it's typically difficult to hold an insurer legally responsible if policyholders find themselves underinsured after losing their home. California courts have ruled homeowners are mainly responsible for choosing their coverage limits and making sure they are adequate. However, exceptions exist — for example, if an agent explicitly promises that a homeowner is fully insured, or signs a homeowner up for less coverage than they requested. The Los Angeles fires could reveal a uniquely devastating level of underinsurance. After wildfires, high demand for labor and materials typically causes the cost of rebuilding to rise 15% to 30%, according to research from the data analytics firm Cotality. In Los Angeles, building costs are also rising due to the Trump administration's tariffs on materials such as Canadian lumber and its crackdown on illegal immigration, impacting the local labor market. Most home insurance policies provide a buffer for these types of unexpected costs known as 'extended replacement cost' which typically provides an extra 10% to 50% of coverage. But if a homeowner's base coverage limit is too low, then even extended coverage can't prevent underinsurance. Late last month, the California Board of Equalization held a two-hour hearing into the causes and consequences of underinsurance, citing the Chronicle's investigation. Multiple experts recommended potential legislation to require insurance companies to offer 50% extended replacement cost coverage as a means to combat underinsurance. The board is expected to issue a report with recommendations for legislative and regulatory actions later this month. Bentley said every single one of his firm's clients in the Los Angeles wildfires is 'woefully underinsured.' He said his firm will soon file underinsurance lawsuits against additional carriers in response to the L.A. wildfires.
Yahoo
11-02-2025
- Business
- Yahoo
AM Best Assigns Issue Credit Rating to CSAA Insurance Exchange's New Surplus Notes
OLDWICK, N.J., February 11, 2025--(BUSINESS WIRE)--AM Best has assigned a Long-Term Issue Credit Rating of "a-" (Excellent) to the $500 million, 8.125% surplus notes, due February 2045, issued by CSAA Insurance Exchange (CSAA) (Walnut Creek, CA). The outlook assigned to this Credit Rating (rating) is negative. The surplus notes are intended to support the company's capital in anticipation of further premium growth and provide an additional layer of protection for catastrophic events, as well as enhance CSAA's financial flexibility. Following the surplus notes issuance, the financial leverage at CSAA will be well within AM Best's guidelines for the rating and the interest coverage is expected to be strong. The notes are callable at par any time after 10 years from the issue date, in whole or in part, with 30 days prior notice and prior approval by the California Department of Insurance. The Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of "a+" (Excellent) for the insurance operations of CSAA remain unchanged. This press release relates to Credit Ratings that have been published on AM Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best's Credit Ratings, Best's Performance Assessments, Best's Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best's Ratings & Assessments. AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit Copyright © 2025 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED. View source version on Contacts Raymond Thomson, CPCU, ARe, ARM Associate Director+1 908 882 Christopher Sharkey Associate Director, Public Relations +1 908 882 2310 Doniella Pliss Director +1 908 882 2245 Al Slavin Senior Public Relations Specialist +1 908 882 2318
