LA homeowners & Advocates are Suing Insurance Companies for not Covering Damages from the Fires

 

The wildfires that swept through Los Angeles neighborhoods in this January took 30 lives and burned thousands of homes. Many homeowners say that insurance companies are telling them they aren't required to cover the damages.  There are two categories of insurers in Los Angeles. There are private insurers who are, in some cases, denying these claims because they are injecting a higher standard for determining whether, in fact, smoke damage has occurred. Then there is the California FAIR Plan, the insurer of last resort that is a private association of the private insurers. In 2017-2018, the FAIR Plan submitted to the California Department of Insurance (CDI) changes to its fire insurance policy, requiring that there be permanent physical changes to the property, which is contrary to state law.

The insurance commissioner has issued a bulletin that made clear that smoke damage is still a covered loss in California, that insurers have a duty under California law to reasonably investigate smoke damage claims. The problem is that the department ultimately doesn't decide the claims, and so people are forced to resort to go to court to have these claims paid.

So insurers have been asking and getting substantial rate increases since the 2018 Camp Fire, where they lost about $12 billion. State Farm, after the LA wildfires, filed for an emergency rate increase of 22% in California. That's been estimated to mean an additional $600, on average, per policyholder. And now we're waiting to see what the insurance commissioner will finally decide with regard to that rate increase.

Clashes over covering smoke damage have become a growing issue in states that have had devastating fires in recent years - including California, Colorado and Hawaii, said Amy Bach, executive director of United Policyholders, a public interest advocacy group. Home insurance companies have responded by looking for ways to limit their financial risks. Some major carriers have fled wildfire-prone areas. A 2022 report by the nonprofit Consumer Watchdog found that others were adding new limits to their coverage and restricting investigations into the scope of fire damage.

Consumer Watchdog has just sued the CDI and Commissioner Ricardo Lara to protect California homeowners from hundreds of millions in surcharges that may soon be on their insurance bills. The surcharges result from a decision reached by the Commissioner last summer to allow the insurance companies that comprise and operate the California FAIR Plan to pass-through costs to their policyholders when the FAIR Plan is forced to assess those companies for funds after a catastrophe.  

Read the April 13, 2025 NPR article.

Read the April 15, 2025 Consumer Watchdog article.

Read the April 14, 2025 Consumer Watchdog Petition/Complaint.