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California’s major insurance companies named in new lawsuits alleging collusion

In the wake of January’s deadly and decimating fires in L.A.’s Pacific Palisades neighborhood and Altadena, insurance companies have taken heat for dropping homeowners before the blazes and seeking rate hikes in their aftermath.

Now those insurers face a pair of lawsuits alleging that they colluded in a “nefarious conspiracy,” Times reporting fellow Karla Marie Sanford wrote.

Attorneys accuse State Farm, Farmers and other major insurers of conspiring to “eliminate competition between them,” according to the lawsuit, by “intentionally and systematically” forcing homeowners to turn to the state’s insurer of last resort, called the FAIR Plan.

Workers are seen alongside lots in the fire-ravaged Pacific Palisades Bowl Mobile Estates on April 15.

(Genaro Molina / Los Angeles Times)

A group of homeowners filed one complaint in Los Angeles Superior Court on Saturday, demanding a jury trial. A second class-action suit was filed by attorneys the same day, with the same accusations.

“The complaints allege that, by colluding to push plaintiffs and so many like them to the FAIR Plan, the defendants 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,” attorney Michael J. Bidart of Shernoff Bidart Echeverria LLP wrote in a statement.

The fires killed 30 people and caused as much as $164 billion in total property and capital losses, according to a study from the UCLA Anderson Forecast, with $75 billion of that in insured losses.

“The plaintiffs are seeking three times the damages each has sustained,” Karla reported.

“The lawsuits follow others regarding insurers’ handling of the aftermath of the Eaton and Palisades fires,” Karla noted, “including against Insurance Commissioner Ricardo Lara and the California FAIR Plan (specifically about smoke damage).”

Eaton fire victims have also called for Lara to formally investigate State Farm, alleging that a series of delayed and denied claims are financially burdening residents who lost homes.

Given the astronomical payouts, the state-backed insurer of last resort might need a bailout, my colleague Laurence Darmiento reported in January, since it has just $377 million in reserves and additional reinsurance.

The Eaton fire razed neighborhoods in Altadena. It and the Palisades fire caused as much as $164 billion in total property and capital losses, a study says.

(Allen J. Schaben / Los Angeles Times)

If it runs out of funds, licensed property insurers in the state — including State Farm and Allstate — are required to cover the remaining claims. But those insurers are allowed to surcharge their own policyholders to recoup those payments, meaning those with insurance coverage across the state could see their rates increase.

In addition to that possible charge, State Farm is seeking state approval to hike rates 17%, saying it’s a necessary step in order “to eventually [restore] the company’s financial strength” in the face of an estimated $7.6 billion in “direct losses” from the L.A. County fires.

Insurance Commissioner Lara “provisionally” granted State Farm’s request last month, pending a formal hearing this month.

Lara has led the state’s insurance department since 2019 and has faced criticism from consumer groups and one of his predecessors, who say he’s too cozy with the companies he’s tasked with regulating.

State Farm, Berkshire Hathaway and other major insurers face plenty of criticism of their own, including that they are perpetuating the climate crisis by continuing to invest hundreds of billions of dollars in the fossil fuel industry.

Today’s top stories

Mature shade trees were chopped down in downtown L.A.

(Carlin Stiehl / Los Angeles Times)

Why would someone cut down L.A.’s urban trees?

• A vandal (or vandals) armed with a chain saw cut down dozens of trees across downtown L.A. over the weekend
• “The Los Angeles Police Department told The Times it had no information about the tree destruction, and an email and phone call to the city’s Urban Forestry Division went unanswered Sunday,” my colleague Susanne Rust reported.

Mayor Karen Bass weighs deep cuts, including layoffs, as L.A.’s challenges mount

• Bass is set to give the yearly State of the City address today and release her budget for the upcoming fiscal year, laying out her plan for eliminating a nearly $1-billion shortfall.
• The Times’ David Zahniser and Julia Wick note some of the other challenges facing the city: “Construction of new homes has steadily slowed, even as housing costs climb. Film and television productions have been fleeing the city, wounding an entertainment industry already in crisis. President Trump’s trade war and immigration crackdown threaten two other pillars of the economy: international trade and tourism.”

Former L.A. Councilmember Kevin de León faces ethics fine for voting on issues in which he had a financial stake

• According to a report prepared by the enforcement arm of the L.A. City Ethics Commission, De León has admitted to five counts related to unethical conduct.
• The former council member “is facing an $18,750 ethics fine for voting on City Council decisions in which he had a financial interest and for failing to disclose income,” Times reporter Ben Poston wrote.

What else is going on

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This morning’s must reads

The Capitol Building in Sacramento. State workers have garnered millions for unused time off.

(Myung J. Chun / Los Angeles Times)

Some state workers are cashing out big by banking their days off. California paid a prison supervising dentist $1.2 million last year when he retired. “He topped a list of nearly 1,000 workers who left state service last year with $100,0000 or more in banked leave benefits,” Melody Gutierrez reports in her Times subscriber exclusive analyzing state payroll records. “In all, California paid departing workers $413 million last year for unused time off.”

How can we make this newsletter more useful? Send comments to essentialcalifornia@latimes.com.

For your downtime

Disneyland’s 70th anniversary celebrations will begin May 16.

(Artist concept / Disneyland Resort)

Going out

Staying in

A question for you: What is the best concert or music festival you experienced in California?

Email us at essentialcalifornia@latimes.com, and your response might appear in the newsletter this week.

And finally … a great photo

Show us your favorite place in California! Send us photos you have taken of spots in California that are special — natural or human-made — and tell us why they’re important to you.

Catherine Meyers takes in the scenery from the top of a dune at Mesquite Flat Sand Dunes in Death Valley National Park.

(Laura Brown)

Today’s great photo is from full-time RVers Catherine Meyers and Laura Brown: Mesquite Flat Sand Dunes.

Catherine writes: “We are NP (national parks) geeks and Death Valley surprised us. What an amazing display of Mother Nature at her finest. From 282’ below sea level to over 9k’ peaks, salt flats to sand dunes. Absolutely beautiful and spiritual. If you need to clear your head and heart, this is the place.”

Have a great day, from the Essential California team

Ryan Fonseca, reporter
Amy Hubbard, deputy editor, Fast Break

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