Latest news with #FAIRPlan
Yahoo
8 hours ago
- Business
- Yahoo
New lawsuits accuse insurance companies of secret scheme to drive up prices for homeowners: 'Conspiracy and collusion'
Two lawsuits filed in Los Angeles say insurance companies colluded to force homeowners in high-risk wildfire areas onto California's FAIR insurance plans. According to the Associated Press, the lawsuits want to hold 25 major insurance companies responsible for the "illegal scheme" that has limited coverage for homeowners. The filings say their practices are "in violation of California's unfair competition and antitrust laws." The lawsuits allege that the insurance companies, including State Farm, worked together in 2023 to deny high-risk policies, making the FAIR Plan many homeowners' only option. The FAIR Plan is California's insurer of last resort. It's a program that gives high-risk homeowners access to insurance policies if they're denied through traditional avenues. These high-premium policies offer basic and limited coverage capped at $3 million. These policies are not enough to cover damage caused by severe disasters. And disaster struck in January, with extreme wildfires that destroyed almost 17,000 structures. Countless homeowners were left underinsured on the FAIR Plan. Many people can't get a traditional policy because the insurance companies don't want to be financially responsible for these natural disasters. Wildfires, droughts, floods, and other extreme weather events are becoming more frequent. By denying coverage in areas prone to climate instability, they're prioritizing profits. Furthermore, over $500 billion of U.S. insurance companies' investments are in the oil and gas industry, per the Center for International Environmental Law. Burning oil and gas creates harmful emissions that destabilize climate conditions. This leads to extreme weather events that destroy homes and leave people in financial ruin. Michael J. Bidart, who represents the homeowners, said in a statement, per AP: The insurance companies "have reaped the benefits of high premiums while depriving homeowners of coverage that they were ready, willing, and able to purchase to ensure that they could recover after a disaster like January's wildfires." Insurance companies are denying coverage to boost profits while making money off the very practices that are causing climate instability. Do you think America is in a housing crisis? Definitely Not sure No way Only in some cities Click your choice to see results and speak your mind. Bankrate advises homeowners to save claims for major losses, check dwelling coverage, and be proactive about caring for their property. But people are hopeful these lawsuits will help reinstate fair premiums and policies. According to Bankrate, Stephen G. Larson, another lawyer representing the homeowners, said: "California's antitrust and unfair competition laws exist to address the very kind of conspiracy and collusion that the complaints allege the defendants engaged in." Join our free newsletter for good news and useful tips, and don't miss this cool list of easy ways to help yourself while helping the planet.
Yahoo
2 days ago
- Business
- Yahoo
California's Insurance Gap: Mercury Insurance Details What Homeowners Need to Know
Thousands of California Homeowners Are Underinsured LOS ANGELES, May 29, 2025 /PRNewswire-PRWeb/ -- The devastation caused by January's Pacific Palisades and Altadena wildfires served as powerful reminders of how crucial it is for homeowners to have adequate insurance coverage. In addition to the emotional toll of losing a home, the financial burden can be overwhelming — particularly for those who discover their coverage falls short. According to a recent report in the San Francisco Chronicle, a significant number of California policyholders are underinsured, meaning that they may not receive sufficient funds to rebuild a home comparable to the one they lost. Equally concerning is data from LendingTree, which reveals that of the nearly eight million residences in California, 806,600 are completely uninsured — that's 10.5% of all homeowners in the Golden State. And in some counties, such as Lake, Kings and Humboldt, for instance, the rate is even higher. "Being underinsured can turn a crisis into a financial disaster. Waiting until after a catastrophic event such as a wildfire to review your coverage is far too late," said Kelly Butler, VP and Chief Underwriting Officer at Mercury Insurance. "That's why it is essential to meet with your insurance agent at least once a year to ensure your policy reflects current replacement costs and risks." The issue of underinsurance in California is shaped by a combination of evolving market dynamics and environmental challenges. Rising construction costs, the growing threat of wildfires, and shifts in the insurance market all contribute to a complex landscape for homeowners and insurers alike. Here's a closer look at some of the key factors: Rising Insurance Costs: In wildfire prone areas, premiums have increased in response to heightened risk and construction/materials costs. This can place financial strain on homeowners, and these insureds are most likely to allow their coverage to lapse or to underinsure their properties to lower their premiums. Market Adjustments: Some insurance companies have scaled back their offerings in high-risk regions due to increased losses. As a result, some homeowners need to turn to alternatives such as the California FAIR Plan, which provides basic fire insurance coverage, when private options are unavailable. So, what was originally intended as a provider of last resort is now used by 4% of the state's homeowners, up 300% from 2018. Homeowners may need to supplement FAIR Plan policies with additional "wrap-around" policies for broader protection. Increased Wildfire Risk: The growing frequency and severity of wildfires in California have made it more difficult — and costlier — to insure homes in certain areas. This has impacted both insurance availability and affordability. Regulatory Constraints: Proposition 103, passed in 1988, requires insurers to base rates on historical losses. While designed to protect consumers by regulating how insurers set rates, it has also created challenges for insurers that need to adjust rates to account for evolving risks and rising rebuilding costs, which adds complexity to the current insurance landscape. Policy Type Matters: Understanding the difference between actual cash value and replacement cost policies is crucial. The former may not cover the full cost to rebuild, while the latter aims to replace what was lost in today's dollars, up to the policy's limits. What Can Homeowners Do? Reducing wildfire risk on your property remains one of the most effective strategies. Creating defensible space, hardening your home, and taking other fire-mitigation measures can help lower your insurance costs — and may even qualify you for discounts. But homeowners can't solve this issue alone. Broader efforts are also underway to improve the availability and affordability of insurance coverage in high-risk areas. "Fortunately, it's not all doom and gloom," added Butler. "The state is beginning to make meaningful changes. Last year, Insurance Commissioner Ricardo Lara introduced California's Sustainable Insurance Strategy, which supports more accurate pricing in wildfire-prone areas and aims to expand coverage options for homeowners who need it most." By staying informed, proactive, and working closely with their insurance providers, California homeowners can better protect their properties and financial futures — even in the face of growing environmental risks. About Mercury Insurance Headquartered in Los Angeles, Mercury Insurance (NYSE: MCY) is a multiple-line insurance carrier offering personal auto, homeowners, and renters insurance directly to consumers and through a network of independent agents in Arizona, California, Georgia, Illinois, Nevada, New Jersey, New York, Oklahoma, Texas and Virginia, as well as auto insurance in Florida. Mercury also writes business owners, business auto, landlord, commercial multi-peril and mechanical protection insurance in various states. Since 1962, Mercury has provided customers with tremendous value for their insurance dollar by pairing ultra-competitive rates with excellent customer service, through nearly 4,100 employees and a network of more than 6,500 independent agents in 11 states. Mercury has earned an "A" rating from A.M. Best, as well as "Best Auto Insurance Company" designations from Forbes and For more information visit or follow the company on Twitter or Facebook. Contact: PCG – Shane Smith (424) 903-3665 (ssmith@ Media Contact Shane Smith, Mercury Insurance, (424) 903-3665, ssmith@ View original content to download multimedia: SOURCE Mercury Insurance Sign in to access your portfolio
Yahoo
2 days ago
- Business
- Yahoo
Did insurers collude to force homeowners onto state insurance plan? What to know from two blockbuster lawsuits
The firestorms that swept through Pacific Palisades, Altadena and other communities Jan. 7 not only devastated thousands of homeowners but highlighted a giant problem: the growth of the state's insurer of last resort. The California FAIR Plan Assn. offers policies that cover less, but typically are expensive. Now, California home insurers are facing twin lawsuits filed by homeowners who accuse them of colluding over the last several years to force them into the plan in order to profit from the higher premiums while reducing their liabilities in the event of a catastrophe — just what the lawsuits allege happened after the fires. The result, according to one suit, is the insurers "collectively reaped a windfall worth billions of dollars." The Times spoke to both sides, as well as multiple experts to better understand the high-stakes litigation, which faces obstacles but could shake up California's home insurance industry. Who is being sued and exactly what do the lawsuits allege? The Los Angeles County Superior Court suits filed last month name more than 200 insurers and affiliates as defendants, including State Farm, Farmers and Mercury that account for about three quarters of the state's property and casualty insurance sales. The lawsuits accuse them of unfair competition and violations of the Cartwright Act, a state law that prohibits agreements to restrain trade, fix prices or reduce competition. The homeowners assert the insurers engaged in a "group boycott" to terminate policies in Pacific Palisades, Malibu, Altadena and other fire-prone neighborhoods in early 2023 and then refused to write new policies. That left the homeowners with no choice but to join the FAIR Plan, where they paid more but the policies are limited, including through a $3-million coverage cap on dwellings. Read more: Insurers seek to surcharge California homeowners for L.A. County fire costs How would the insurers benefit from such a scheme? The FAIR Plan was established by the Legislature in 1968 but is operated by the state's licensed home insurers that share in its profits and losses. By moving homeowners onto the plan, the insurers would profit from higher premiums, while being exposed to fewer losses due to its limited policies. The result was an effective rate increase without the insurers having to undergo a state review, the lawsuits allege. Why are there two lawsuits? One lawsuit is a proposed class action and seeks to have policyholders compensated for the alleged higher premiums they paid. The other seeks to compensate homeowners who experienced losses during the fires and then suffered further due to their alleged inadequate FAIR Plan coverage. Each lawsuit seeks treble damages. What do the lawsuits cite as evidence of collusion? The litigation claims that the collusion and boycott were carried out through meetings of the FAIR Plan's governing committee and subcommittees, as well as weekly meetings of the Personal Insurance Federation of California and the American Property Casualty Insurance Assn., or APCIA, two leading trade groups, among other mechanisms. However, the lawsuits do not offer any written documentation from these meetings. The lawsuits also note that last year, insurers won the right from Insurance Commissioner Ricardo Lara to surcharge their own residential and commercial policyholders if the FAIR Plan runs out of money — which it has since the fires. One of the lawsuits cites the new policy as evidence of the insurers' "determination to act collusively." APCIA issued a statement saying that it has a legal right to voice industry concerns to the government and that it "complies with all applicable antitrust laws." Read more: Palisades fire victims seek court order forcing FAIR Plan to turn over claims documents So how can the allegations be proved in court? Stephen Larson, a former federal judge whose firm Larson is one of the two representing the plaintiffs, said that the discovery process will be key. "We did a tremendous amount of due diligence prior to bringing this lawsuit, and we anticipate there will be requests for documents, there will be interrogatories [written questions answered under oath] and there will be depositions. We're going to be have the opportunity to depose those that we believe are responsible for this." What do insurers say about all this? Rex Frazier, president of the Personal Insurance Federation, said there was nothing collusive about insurers' behavior. Instead, it was a logical consequence of being unable to get adequate rate increases as costs and wildfire danger have increased. "What business, whether the insurance industry or any other business, can survive a highly inflationary cost structure without the ability to raise its prices? We've been predicting why the FAIR Plan will grow — we're not allowed to have meetings we've held for 30 years?" he said. Read more: Insurer of last resort kept growing. Then L.A. fire victims paid the price Will it be difficult to prove collusion? Yes, it will be a tall order, legal experts say. Donald Pepperman, a partner at Waymaker in Los Angeles who specializes in antitrust litigation, said a key defense probably will be that the insurers acted in their own economic self interest in dropping policyholders. "Why should they be forced to stay in a market that's not profitable when there are other markets in California where there's less disasters?" he asked, adding that without more evidence of collusion the lawsuit may not get far — and finding that will be difficult. "I don't know that they're going to be that unsophisticated, that in the FAIR Plan minutes of a meeting they're going to admit they conspired to pull out of markets or fixed prices." Tom Baker, a professor who specializes in insurance at the University of Pennsylvania's Penn Carey Law school, said the plaintiffs will need to show that they somehow acted in a more "extreme" manner than was supported by their actuarial data, which he agreed will be challenging — though he said the discovery process is a powerful tool. "The bright side of this lawsuit is that we're gonna get some information, but count me skeptical about whether they're gonna succeed, unless they can find some kind of smoking guns." Are there less nefarious reasons for insurers pulling back from the California market? Yes, there are alternative explanations. James Naughton, a former actuary and a professor at the University of Virginia's Darden School of Business, said that advances in data management have allowed insurers to collect more data than ever about the risks they face, with much of it the same across insurers. "What could appear to be collusion could also be companies just using the same data. If I'm an actuary at one company, it's not hard to be an actuary at another company. The information moves," he said. Naughton added that there also can be "soft collusion," a concept that refers to actors in a market trading information or having an understanding of their competitors' strategies, leading to similar decision-making. Read more: Consumer group sues insurance commissioner over Fair Plan assessments on state homeowners What do the plaintiff's attorneys say about all of this? "Do we expect to find a document from party A to party B, saying today we're going to have a meeting to discuss how we're going to collude with each other on avoiding risk and going to FAIR Plan agenda item? No, I don't expect we're going to find that," said Michael Bidart, with Shernoff Bidart Echeverria, the other plaintiffs' firm. "Rare is the case in any litigation where you have a document that provides the ultimate direct evidence." Instead, the attorneys said they will rely on accumulated evidence to show how the insurers allegedly conspired to drop policyholders in order to move them to the FAIR Plan for their own benefit. "So anything else we get on top of it is just icing on the cake," Bidart said. Sign up for our Wide Shot newsletter to get the latest entertainment business news, analysis and insights. This story originally appeared in Los Angeles Times.
Los Angeles Times
2 days ago
- Business
- Los Angeles Times
Did insurers collude to force homeowners onto state insurance plan? What to know from two blockbuster lawsuits
The firestorms that swept through Pacific Palisades, Altadena and other communities Jan. 7 not only devastated thousands of homeowners but highlighted a giant problem: the growth of the state's insurer of last resort. The California FAIR Plan Assn. offers policies that cover less, but typically are expensive. Now, California home insurers are facing twin lawsuits filed by homeowners who accuse them of colluding over the last several years to force them into the plan in order to profit from the higher premiums while reducing their liabilities in the event of a catastrophe — just what the lawsuits allege happened after the fires. The result, according to one suit, is the insurers 'collectively reaped a windfall worth billions of dollars.' The Times spoke to both sides, as well as multiple experts to better understand the high-stakes litigation, which faces obstacles but could shake up California's home insurance industry. Who is being sued and exactly what do the lawsuits allege? The Los Angeles County Superior Court suits filed last month name more than 200 insurers and affiliates as defendants, including State Farm, Farmers and Mercury that account for about three quarters of the state's property and casualty insurance sales. The lawsuits accuse them of unfair competition and violations of the Cartwright Act, a state law that prohibits agreements to restrain trade, fix prices or reduce competition. The homeowners assert the insurers engaged in a 'group boycott' to terminate policies in Pacific Palisades, Malibu, Altadena and other fire-prone neighborhoods in early 2023 and then refused to write new policies. That left the homeowners with no choice but to join the FAIR Plan, where they paid more but the policies are limited, including through a $3-million coverage cap on dwellings. How would the insurers benefit from such a scheme? The FAIR Plan was established by the Legislature in 1968 but is operated by the state's licensed home insurers that share in its profits and losses. By moving homeowners onto the plan, the insurers would profit from higher premiums, while being exposed to fewer losses due to its limited policies. The result was an effective rate increase without the insurers having to undergo a state review, the lawsuits allege. Why are there two lawsuits? One lawsuit is a proposed class action and seeks to have policyholders compensated for the alleged higher premiums they paid. The other seeks to compensate homeowners who experienced losses during the fires and then suffered further due to their alleged inadequate FAIR Plan coverage. Each lawsuit seeks treble damages. What do the lawsuits cite as evidence of collusion? The litigation claims that the collusion and boycott were carried out through meetings of the FAIR Plan's governing committee and subcommittees, as well as weekly meetings of the Personal Insurance Federation of California and the American Property Casualty Insurance Assn., or APCIA, two leading trade groups, among other mechanisms. However, the lawsuits do not offer any written documentation from these meetings. The lawsuits also note that last year, insurers won the right from Insurance Commissioner Ricardo Lara to surcharge their own residential and commercial policyholders if the FAIR Plan runs out of money — which it has since the fires. One of the lawsuits cites the new policy as evidence of the insurers' 'determination to act collusively.' APCIA issued a statement saying that it has a legal right to voice industry concerns to the government and that it 'complies with all applicable antitrust laws.' So how can the allegations be proved in court? Stephen Larson, a former federal judge whose firm Larson is one of the two representing the plaintiffs, said that the discovery process will be key. 'We did a tremendous amount of due diligence prior to bringing this lawsuit, and we anticipate there will be requests for documents, there will be interrogatories [written questions answered under oath] and there will be depositions. We're going to be have the opportunity to depose those that we believe are responsible for this.' What do insurers say about all this? Rex Frazier, president of the Personal Insurance Federation, said there was nothing collusive about insurers' behavior. Instead, it was a logical consequence of being unable to get adequate rate increases as costs and wildfire danger have increased. 'What business, whether the insurance industry or any other business, can survive a highly inflationary cost structure without the ability to raise its prices? We've been predicting why the FAIR Plan will grow — we're not allowed to have meetings we've held for 30 years?' he said. Will it be difficult to prove collusion? Yes, it will be a tall order, legal experts say. Donald Pepperman, a partner at Waymaker in Los Angeles who specializes in antitrust litigation, said a key defense probably will be that the insurers acted in their own economic self interest in dropping policyholders. 'Why should they be forced to stay in a market that's not profitable when there are other markets in California where there's less disasters?' he asked, adding that without more evidence of collusion the lawsuit may not get far — and finding that will be difficult. 'I don't know that they're going to be that unsophisticated, that in the FAIR Plan minutes of a meeting they're going to admit they conspired to pull out of markets or fixed prices.' Tom Baker, a professor who specializes in insurance at the University of Pennsylvania's Penn Carey Law school, said the plaintiffs will need to show that they somehow acted in a more 'extreme' manner than was supported by their actuarial data, which he agreed will be challenging — though he said the discovery process is a powerful tool. 'The bright side of this lawsuit is that we're gonna get some information, but count me skeptical about whether they're gonna succeed, unless they can find some kind of smoking guns.' Are there less nefarious reasons for insurers pulling back from the California market? Yes, there are alternative explanations. James Naughton, a former actuary and a professor at the University of Virginia's Darden School of Business, said that advances in data management have allowed insurers to collect more data than ever about the risks they face, with much of it the same across insurers. 'What could appear to be collusion could also be companies just using the same data. If I'm an actuary at one company, it's not hard to be an actuary at another company. The information moves,' he said. Naughton added that there also can be 'soft collusion,' a concept that refers to actors in a market trading information or having an understanding of their competitors' strategies, leading to similar decision-making. What do the plaintiff's attorneys say about all of this? 'Do we expect to find a document from party A to party B, saying today we're going to have a meeting to discuss how we're going to collude with each other on avoiding risk and going to FAIR Plan agenda item? No, I don't expect we're going to find that,' said Michael Bidart, with Shernoff Bidart Echeverria, the other plaintiffs' firm. 'Rare is the case in any litigation where you have a document that provides the ultimate direct evidence.' Instead, the attorneys said they will rely on accumulated evidence to show how the insurers allegedly conspired to drop policyholders in order to move them to the FAIR Plan for their own benefit. 'So anything else we get on top of it is just icing on the cake,' Bidart said.
Los Angeles Times
23-05-2025
- Business
- Los Angeles Times
How to Make Sure You're Properly Insured Before the Next Wildfire
Recent wildfires have reshaped California's insurance landscape, and some Los Angeles homeowners are seeing their premiums skyrocket or are facing policy non-renewals. Wildfire survivors have also gotten smaller insurance payouts than expected, and other Los Angeles County residents who were spared from the fires may not realize they're underinsured. But there are proactive steps you can take now to make sure you're protected in the next blaze. Use this guide to learn how to prepare the proper documentation, choose the right amount of coverage, and know your rights. Standard homeowners' policies usually cover wildfire damage, but in high-risk zones, coverage may be reduced, excluded, or even canceled. 'Your insurance company is not on your side or your good neighbor. They're a for-profit business,' Amy Bach, Executive Director of United Policyholders, warned homeowners. Review these key components of your policy: If your insurer has dropped your policy or won't renew, compare policies through a broker, shop regional carriers, or seek help through the FAIR Plan. Many major insurers, including State Farm and Allstate, have limited or paused new policies in wildfire-prone regions, but you're not out of options. Alternatives include: Ask brokers about bundling options and ensure you're comparing policies based on replacement cost coverage, not just price. Know Your Rights Wildfire survivors in California are protected by a growing set of regulations and state laws enforced by the California Department of Insurance. If you believe your insurer has acted unfairly, file an online complaint with the California Department of Insurance or call 1-800-927-4357. 'They owe to replace what you had with like kind and quality up to your policy limits,' Bach said. 'Stick for stick, board for boards, the exact same house that you had.' California law requires insurance companies to offer discounts to homeowners who make their homes more fire-resistant. These discounts can range from 5% to 20%, depending on the insurer and the upgrades you make. Don't wait for disaster to strike. Take these documentation steps today so that the evidence can speed up your claim and reduce disputes over what was lost. 'The insurance company is not always going to take your word for things,' Bach said. Documentation can 'make or break your case.' Annual check-ins with your insurance agent allow your coverage to keep pace with your home's value and fire risk. Bach also recommends checking your dwelling coverage with some simple math to be sure it's realistic for California's current costs. 'If you know how many square feet of living space is in your home, and you know what your current dwelling limit is on the house,' Bach said, 'you want to divide that dwelling limit by the amount of square footage and see how much money you would have available to you to pay a contractor.' Bach said the amount can vary based on your home, but it should be somewhere between $300 and $400 a square foot at a minimum. Other experts estimate that rebuilding after the wildfires can average $600 per square foot, factoring in tariffs, labor shortages and increased demand. Custom homes or properties built with high-end, fire-resistant materials can reach over $1,000 per square foot. If you're not sure where to start, visit United Policyholders for more wildfire recovery and insurance resources. You can also try the insurance finder tool from the California Department of Insurance or read more insurance tips from CAL Fire.
