Major insurance company sparks outrage with decision that affects thousands of policies: 'The opposite of what we've been hoping for'
Increasing frequencies of wildfires are pushing insurance companies out of California. Liberty Mutual is one of the latest insurance groups to abandon insurance coverage for California residents, the North Bay Business Journal reported.
In late December, Liberty Mutual announced plans to roll back on and eventually eliminate insurance coverage for California condo and apartment renters by 2026. According to the NBBJ, 88,000 policyholders throughout the state are expected to lose coverage.
Liberty Mutual's withdrawal came about promptly before California's Department of Insurance revealed a historic insurance reform model to retain and expand insurance coverage throughout the state.
The reformed model would allow insurers to factor in reinsurance costs (backup insurance for insurance companies) in their customer costs. However, insurers would need to continue offering comprehensive homeowner insurance policies in wildfire-prone areas at a proportionate rate of 85% of their statewide market share.
For example, if an insurance group accounts for 10% of California's total homeowner insurance market, it must write or renew at least 8.5% of its insurance policies in the state's wildfire-prone areas.
"Liberty Mutual's recent announcement that they're getting out of the California rental and condo insurance market was the opposite of what we've been hoping for," said Amy Bach, executive director of United Policyholders, per NBBJ.
In 2024, Cal Fire responded to 8,024 fires throughout the state, a 9% jump from the previous year.
Long periods of drought and extreme heat, brought on by human activities that include intensive agriculture, deforestation, and harmful heat-trapping gas pollution (from using dirty energy sources), set the ideal environment for wildfires to ravage the lands.
More than ever, California residents and homeowners need security and insurance to protect their homes and assets.
What would you do if natural disasters were threatening your home?
Move somewhere else
Reinforce my home
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This is happening already
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California Insurance Commissioner Ricardo Lara issued a landmark regulation to require insurers to increase their coverage in underserved areas of the state by trading the allowance of catastrophe modeling in insurers' rates.
Idaho's Department of Insurance recently proposed the Idaho Wildfire Risk Mitigation and Stabilization Pool Act. This legislation would assist homeowners in securing funds to protect their homes from wildfire damage, which could encourage insurers to renew coverage or lower premiums.
Hopefully, these initiatives will inspire other states to action to protect more homeowners from losing insurance coverage on their homes.
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Los Angeles Times
7 days ago
- Los Angeles Times
L.A. County fire victims sue State Farm for negligence, claim they were ‘grossly underinsured'
Six couples and one individual who lost their homes in the devastating Los Angeles fires are suing State Farm, claiming that they were 'misled' by the insurance company and that their homes were deliberately and 'grossly underinsured.' The lawsuit, filed in Superior Court in Los Angeles on Monday, alleges that State Farm General — the California home insurer that is part of the larger State Farm Group based in Bloomington, Ill. — took advantage of homeowner's lack of knowledge about rebuilding costs and set projected replacement costs far lower than the actual costs, leaving fire victims without enough money to replace or rebuild their homes. State Farm, California's largest home insurer, has engaged in a 'multi-faceted illegal scheme' that is designed to 'reap enormous illicit profits by deceptively misleading over a million homeowners in California,' the complaint alleges. The lawsuit alleges negligence, breach of contract and several other causes of action, and seeks compensatory and punitive damages and reform of State Farm's policies. Representatives for State Farm did not immediately respond to a request for comment. This marks the second time L.A. fire victims have sued insurers because they believe they were systematically underinsured. USAA and two insurers affiliated with AAA were sued in early June by policyholders with similar claims that they did not have enough money to rebuild. Of the seven households who are a part of the lawsuit, four were from Altadena, two were from the Pacific Palisades and one was from Sierra Madre. Each of the homeowners had policies with State Farm, and some were underinsured by more than $2 million when their homes were completely destroyed by the Palisades and Eaton fires. In one instance outlined in the lawsuit, homeowners wrote to their State Farm agent prior to the January fires to confirm whether the dwelling limit of just over $1 million would sufficiently cover the cost of rebuilding their Altadena home. The agent confirmed the amount covered the total cost to rebuild. After their home burned down, the estimates the couple received to rebuild were in excess of $3 million, the lawsuit says. The lawsuit comes days after State Insurance Commissioner Ricardo Lara announced his department is launching a formal inquiry into how State Farm General is handling thousands of claims filed by fire victims after receiving complaints. As of June 12, State Farm said it has received more than 12,800 claims related to the fires and has paid over $4.03 billion to its California customers. State Farm has also been named as a defendant in an April lawsuit filed by homeowners who accuse dozens of insurers of colluding over the last several years to force them into the California FAIR Plan, the insurer of last resort that offers limited, but typically expensive, coverage. The homeowners claim the insurers refused to write new policies in fire-prone areas and then profited from the higher premiums while reducing their liabilities with the FAIR Plan in the event of a catastrophe like the January fires. The latest lawsuit against State Farm claims that the insurer's alleged collusion with other carriers to push homeowners onto the FAIR Plan meant the only policies left for the company were ones that 'carried deliberately suppressed coverage limits of sufficiently low magnitude,' posing a lesser exposure risk for State Farm. The average homeowner, the complaint states, would have little reason to question the replacement costs estimated by State Farm because it writes over a million California homeowners insurance policies each year by generating reconstruction cost estimates. The policyholders in the suit, as well as several other impacted homeowners, the lawsuit said, are unable to rebuild their homes without 'relief from the legal system.' Times staff writer Laurence Darmiento contributed to this report.
Fast Company
13-06-2025
- Fast Company
California launches probe into State Farm's handling of L.A. wildfire claims
California's top insurance regulator on Thursday launched an investigation into State Farm over the company's handling of claims from the January Los Angeles-area wildfires. The investigation comes after survivors of the Palisades and Eaton fires said that the state's largest home insurer was delaying and mishandling claims regarding damage to their homes and possible contamination from smoke. The blazes destroyed thousands of buildings around Los Angeles, killed 30 people and displaced thousands of others. They were estimated to be among the costliest natural disasters in U.S. history. California Insurance Commissioner Ricardo Lara said the investigation will review whether the company complied with state consumer protection and claim-handling laws. 'Californians deserve fair and comprehensive treatment from their insurance companies,' the Democrat said in a statement. 'No one should be left in uncertainty, forced to fight for what they are owed, or face endless delays that often lead consumers to give up.' State Farm, which has about 1 million home insurance customers in California, said it will cooperate with the state's review. The insurer has received roughly 13,000 claims related to the fires and has paid out about $4 billion to customers, the company said. 'We're here to help our customers recover and we empathize with those who are rebuilding their lives,' State Farm said in a statement. 'Our focus continues to be on supporting our customers in their recovery from the largest fire event we have ever experienced.' Survivors of the Eaton fire in Altadena have raised concerns about possible lead, asbestos and heavy metal contamination in their homes because of smoke. State Sen. Sasha Renée Pérez, a Democrat representing Pasadena, in April called on Lara to launch a probe into the alleged mishandling of claims. 'The survivors of the Los Angeles County fires are experiencing financial and emotional hardships due to State Farm's delays and denials of their valid insurance claims,' she and other lawmakers said at the time. 'Despite years of faithfully paying premiums, they have been met with excessive documentation demands, denial of claims despite clear evidence, a convoluted and arduous claims process, and silence when seeking help after the disaster.' Lara said homeowners should file formal complaints regarding State Farm's handling of claims to help the state take action. The Department of Insurance announced a task force last month to recommend best practices for addressing smoke damage. A wildfire victims advocate praised the investigation as a 'critical step toward accountability.' 'State Farm is unjustly denying legitimate smoke damage claims, forcing families already harmed by the Eaton and Palisades fires to make the impossible choice of living in toxic homes or paying tens of thousands out of pocket for remediation. We stand ready to hold State Farm accountable,' Kiley Grombacher, co-founder of the California Fire Victims Law Center, said in a statement. Insurers including State Farm had difficulty doing business in California even before the wildfires. In 2023, State Farm and others stopped issuing residential policies because of the wildfire risk. Last year, Lara unveiled regulations aimed at giving insurers more latitude to raise premiums in exchange for more policies in high-risk areas. State Farm said at the time the company was struggling. The wildfires, which destroyed more than 16,000 buildings, made matters even worse. In May, state regulators allowed State Farm to raise premiums 17% statewide for its California home insurance customers to help the company rebuild its capital after the costly wildfires. State Farm initially sought a 22% rate increase for homeowners but revised it down a recent hearing before an administrative judge. The new rates in effect this month include a 38% hike for rental owners and 15% for tenants. People who lost homes in the fires sued in April, alleging State Farm and other insurers colluded to 'suddenly and simultaneously' drop coverage or halt writing new policies in fire-prone areas, including areas that burned. That left the homeowners underinsured and struggling to rebuild, the lawsuit alleges. The American Property Casualty Insurance Association, the largest national trade association representing home, auto and business insurers, called the lawsuits meritless, saying it monitors to ensure its members comply with the state's antitrust laws.
Newsweek
13-06-2025
- Newsweek
California To Investigate State Farm's Wildfire Insurance Claims
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. California regulators have launched an investigation into State Farm's handling of thousands of damage claims from policyholders affected by the devastating wildfires that ravaged Los Angeles County in January. Ricardo Lara, the state's insurance commissioner, said the inquiry was prompted by a growing number of complaints against the company in the wake of the deadly blazes. "Californians deserve to return to homes that are truly safe, not forced to handle smoke, soot, and ash on their own," Lara said in a news release. "Our goal is to close the protection gap and make sure insurance works the way it is supposed to, especially in the face of climate-intensified disasters." What Happened? The catastrophic wildfires that burned through Los Angeles County for days in January covered tens of thousands of acres of land, killed at least 29 people, destroyed thousands of properties and caused billions of dollars in damages. According to CoStar, the blazes wiped out almost $31 billion in property values, ravaging about 11,000 properties between homes and businesses. More than 95 percent of these real estate losses affected single-family homes. State Farm, the largest home insurer in the country, said it had received a total of 12,855 claims related to the fires as of June 10 and had already paid more than $3.96 billion in claims. The company has estimated that the January wildfires will cost it a total of $7.6 billion, though reinsurance payments from its parent company would lower the losses to about $612 million. A State Farm insurance company sign amid the rubble of a building destroyed by the Palisades fire on Sunset Boulevard in the Pacific Palisades neighborhood of Los Angeles on January 16. A State Farm insurance company sign amid the rubble of a building destroyed by the Palisades fire on Sunset Boulevard in the Pacific Palisades neighborhood of Los Angeles on January 16. FREDERIC J. BROWN/AFP via Getty Images While State Farm says it is paying claims to policyholders affected by the fires in keeping with its "promise to customers," several customers have accused the insurer of mishandling, delaying and denying claims in the weeks and months following the blazes, leaving them in precarious financial positions or forced to stay in dangerous homes. Anger against the company has been boiling over in California since January following reports that the insurer had cut hundreds of policies in areas affected by the fires only months before the blazes broke out. That anger is mounting as many policyholders feel they are not being treated fairly by the company, which has asked for a 17 percent emergency rate hike to stabilize its financial position in the state after the fires. What Is the Investigation About? Lara announced on Wednesday that the California Department of Insurance had initiated a market conduct examination of State Farm, expanding its ongoing investigation into consumer complaints against the insurer. This type of inquiry includes a "thorough, fact-based review" that typically takes several months, the department said. The commissioner said the department had received numerous complaints from policyholders, with "some troubling patterns" emerging from them, including "the frequent reassignment of multiple adjusters with little continuity in communication, inconsistent management of similar claims, and inadequate record-keeping or information-sharing among claims teams." These issues create "unnecessary stress" for policyholders, "prolong recovery, and erode trust," Lara said. The commissioner added that while the department had launched an investigation, it could take action and advocate for consumers only if it received a formal complaint. "I urge any wildfire survivor facing delayed payments, claim disputes, multiple adjusters, smoke damage issues, or any other problems to file a formal complaint with my Department," Lara said. Complaints can be submitted on the department's website at or homeowners can call 800-927-HELP. State Farm has said it is cooperating with the California Department of Insurance in the market conduct exam process. What Are People Saying? Insurance Commissioner Ricardo Lara said in a news release following Wednesday's announcement: "Californians deserve fair and comprehensive treatment from their insurance companies. No one should be left in uncertainty, forced to fight for what they are owed, or face endless delays that often lead consumers to give up. "While there are national standards for insurance claims handling, they can be vague and inconsistently applied, especially during large-scale, climate-driven disasters. This examination will assess whether State Farm has complied with California's consumer protection and claims handling laws and will help determine if further reforms are needed as natural disasters increasingly disrupt insurance markets across the country." Assemblymember John Harabedian, a Democrat representing Pasadena, said in a news release: "Following the Eaton Fire, our community deserves clear communication and fair treatment to facilitate a swift rebuilding process. I have received numerous complaints from neighbors regarding the claims process. A market conduct examination will provide the clarity we urgently need. I am grateful to Commissioner Lara for taking action to demand transparency and ensure that families receive the answers they deserve." State Farm said in a news release on Thursday: "A fair review will find that thousands of State Farm customers are being helped by our teams on the ground in Los Angeles County and are very satisfied. Our efforts will remain on serving all our customers and meeting our obligations under the contract while providing the necessary information to the CDI. The Department routinely examines all insurance companies. These exams help ensure processes and procedures are in full compliance with state regulations." What Will Happen Next? The investigation launched by California regulators on Wednesday is expected to take months. Meanwhile, California homeowners who have insurance policies with State Farm are likely to face a rate increase this year as the carrier's request for a 17 percent hike received interim approval by the California insurance commissioner last month. The rate changes are expected to affect homeowners renewing their policies on or after June 1, 2025.
