Homeowners affected by the devastating January 7 wildfires in Los Angeles County have filed lawsuits against three major home insurance providers — USAA, CSAA Insurance Exchange, and Interinsurance Exchange of the Automobile Club — alleging they were left severely underinsured and unable to rebuild after the destruction of their properties, according to a recent Los Angeles Times article.
Allegations of Systematic Underinsurance
The lawsuits, filed in Los Angeles County Superior Court on June 4, claim that insurers significantly underestimated home replacement costs for years. According to the plaintiffs, this led policyholders to purchase coverage that ultimately fell short when they needed it most.
The legal actions accuse the companies of fraud, negligence, and breach of contract, among other charges, and seek damages and systemic reforms in how insurers determine coverage recommendations.
Attorney Gregory L. Bentley, who is representing the plaintiffs, stated that policyholders were misled into believing they were adequately covered. He emphasized that many victims were left “stranded, homeless, and hopeless” after discovering the insufficiency of their insurance policies post-disaster.
Details of the Claims
The suits are nearly identical, differing only in the details related to the specific insurers. Both complaints highlight broader industry concerns about underinsurance, citing the use of cost estimator software and alleged business practices prioritizing profit over policyholder protection.
The plaintiffs in the case against the AAA-affiliated insurers, James and Lisa Fulker, owned a renovated 1,872-square-foot home in Malibu. Their policy included $713,000 in primary dwelling coverage and an extended replacement cost coverage of 125%. Following the fire, they reportedly received rebuilding estimates of $800 or more per square foot — more than double their insurer’s $380-per-square-foot calculation.
In the USAA case, plaintiffs Ethan and Marijana Alexander owned a 2,135-square-foot home in Pacific Palisades with $584,000 in dwelling coverage and a $146,000 home protection endorsement. The couple also found that rebuilding costs — estimated at more than $850 to $1,000 per square foot — greatly exceeded USAA’s estimated $342 per square foot.
Insurer Responses
USAA spokesperson Bekah Nelson stated that the company was reviewing the lawsuit and declined to comment on its specifics. However, she noted that USAA had paid nearly $1.4 billion in claims related to the wildfires, and that over 90% of homeowner claims had received payments.
CSAA Insurance Exchange and the Interinsurance Exchange of the Automobile Club both declined to comment, citing pending litigation.
Wider Legal Context
These lawsuits join a growing body of litigation resulting from the January fires, which claimed at least 29 lives and damaged or destroyed more than 16,000 properties across areas including Altadena and Pacific Palisades. The fires, driven by strong Santa Ana winds, affected a wide swath of Southern California.
Separate legal actions have been filed against the California Fair Plan Association — the state’s insurer of last resort — with allegations of mishandling smoke damage claims. Additionally, over 100 insurers — including the three named in the new lawsuits — are defendants in a broader case alleging they colluded to push policyholders onto the FAIR Plan to limit claim liability. Critics say FAIR Plan policies typically come with higher costs and lower coverage.
Basis for the New Lawsuits
The complaints filed on June 4 assert that underinsurance was not incidental but a result of systemic industry practices, including:
- The use of flawed cost estimator tools
- Incentives tied to profitability and business volume
- Allegedly inadequate regulatory oversight and insurer accountability
The cases continue to unfold as policyholders and insurers grapple with the aftermath of one of Southern California’s most destructive fire seasons. The outcomes of these lawsuits could have significant implications for how home insurance coverage is evaluated and marketed in wildfire-prone regions.
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