The current submitting of two sweeping antitrust lawsuits in California towards an extended record of many of the admitted California insurance coverage corporations has generated fast consideration inside the insurance coverage {industry}. 1 The lawsuits accuse main property insurers of colluding to cut back entry to inexpensive and complete hearth insurance coverage in high-risk areas of California by collectively withdrawing from the voluntary insurance coverage market and funneling householders into the California FAIR Plan. Whereas the allegations are vital, it is very important do not forget that they continue to be allegations. As I’ve repeatedly reminded readers of this weblog, a lawsuit is a press release of 1 facet’s claims and authorized theories, and all defendants are presumed harmless of any wrongdoing till the information alleged in a criticism are confirmed in court docket.
The criticism was filed by two extremely revered legislation companies. Shernoff Bidart Echeverria LLP has lengthy been acknowledged as one of many premier policyholder legislation companies within the nation, recognized for taking up main insurers in groundbreaking unhealthy religion and client safety circumstances. Michael Bidart is a revered colleague and has constructed a profession representing people and companies towards giant insurance coverage entities. His agency has lengthy supported the efforts of United Policyholders.
Becoming a member of them is Larson LLP, led by former U.S. District Decide Stephen Larson. Larson LLP has a repute for dealing with complicated business litigation, regulatory disputes, and high-stakes trial work. The pairing of those two companies brings substantial authorized expertise and assets to what may turn out to be some of the consequential antitrust circumstances in current reminiscence associated to insurance coverage practices. These are critical lawsuits filed by glorious attorneys and never introduced for publicity.
Based on the complaints, the insurers named within the case management roughly seventy-five p.c of the California householders insurance coverage market. The plaintiffs allege that starting in 2023, these insurers collectively started canceling, non-renewing, and refusing to put in writing new insurance policies in sure fire-prone areas akin to Malibu, Altadena, and the Pacific Palisades. The fits contend that this was not a sequence of impartial enterprise choices however as an alternative, a coordinated effort to withdraw from these areas and drive householders into the state-run FAIR Plan, which gives costlier insurance policies with considerably much less protection.
On the coronary heart of the complaints are the allegations that these corporations engaged in a boycott. In antitrust legislation, a boycott refers to an settlement amongst opponents to refuse to take care of a selected get together or market section. Such group boycotts are thought-about critical violations of antitrust legislation as a result of they distort market competitors by excluding sure contributors or limiting client alternative.
On this case, the plaintiffs declare the boycott focused high-risk hearth zones, leading to householders shedding entry to aggressive insurance policies and being pushed right into a single, inferior insurance coverage choice. The alleged end result was that householders have been compelled to pay extra money for much less safety whereas the insurers lowered their very own monetary publicity and continued to profit financially by means of their participation within the FAIR Plan.
These lawsuits are based mostly on California state legislation, particularly the Cartwright Act, which is California’s model of antitrust laws. In contrast to the federal antitrust legal guidelines, the Cartwright Act doesn’t embrace the restricted exemption granted below the McCarran-Ferguson Act, which gives insurers some safety from federal antitrust legal guidelines when their conduct is regulated by the state and doesn’t contain boycott, coercion, or intimidation.
Even below federal legislation, the exemption doesn’t apply to conduct involving boycotts, that are particularly carved out. On this case, the plaintiffs allege a boycott on the very middle of their claims. That alone is a considerable motive why the antitrust exemption wouldn’t apply. As well as, the conduct at subject entails the collective withdrawal from markets, shifting shoppers right into a plan collectively managed by the identical insurers, and potential manipulation of entry to merchandise. In my opinion, these seem like effectively outdoors the restricted scope of any antitrust immunity.
If the case strikes ahead, it should proceed into discovery. That is the part in litigation the place either side change paperwork, take depositions, and search data and communications which will help their claims or defenses. Plaintiffs’ legal professionals will possible search inner emails, memoranda, assembly notes, and communications amongst insurers relating to choices to tug again from the voluntary market. They will even search to grasp the roles numerous firm executives performed in these choices and whether or not opponents have been conscious of, consulted with, or influenced each other.
Commerce affiliation involvement will even come below scrutiny. Lots of the named insurers are members of California-based commerce teams such because the Affiliation of California Insurance coverage Firms, the Private Insurance coverage Federation of California, and different industry-specific organizations. Plaintiffs will likely be in search of data from these associations to find out whether or not insurers used these boards to share methods, align choices, or agree on whether or not or to not write enterprise in sure areas.
It is not uncommon in antitrust circumstances for courts and plaintiffs to search for what is called parallel conduct, the place a number of opponents behave the identical method on the identical time. Whereas that alone will not be sufficient to show collusion, courts typically search for what are referred to as “plus elements,” akin to communications between corporations, membership in widespread associations, or proof of motive to align conduct. The lawsuit already references statistics exhibiting a fast enhance in FAIR Plan enrollments and market focus, in addition to allegations that the FAIR Plan’s design and governance construction permits insurers to cut back their very own legal responsibility whereas charging increased premiums. These information, if substantiated, may help the plaintiffs’ claims.
The insurance coverage corporations named within the lawsuit could have the chance to reply, current proof, and argue that their choices have been based mostly on authentic enterprise judgments, akin to wildfire threat, reinsurance prices, and regulatory challenges. Nevertheless, the lawsuit opens a significant dialog about competitors, transparency, and equity in California’s insurance coverage market. It raises the query of whether or not coordinated market exits may be thought-about unlawful conduct once they end in lowered entry and better prices for shoppers.
This case could in the end assist outline the boundaries of what’s lawful in an {industry} that’s each closely regulated and extremely consolidated. Antitrust lawsuits within the insurance coverage area should not introduced as typically as they have been 50 years in the past. These fits ought to immediate critical reflection inside the insurance coverage {industry} about how choices are made and the way these choices are perceived when many opponents act in the identical method on the identical time. Whether or not or not the plaintiffs prevail, the lawsuit reinforces the significance of antitrust consciousness in claims dealing with, underwriting, and strategic decision-making on the govt degree. The potential penalties of violating these legal guidelines are vital, and insurers ought to be taking steps now to make sure they aren’t uncovered to related allegations sooner or later.
For background, I just lately wrote in regards to the fundamentals of antitrust legal guidelines for insurance coverage practitioners in A Fundamental Understanding of Antitrust Regulation for Claims Adjusters.
Thought For The Day
“When everyone seems to be pondering alike, nobody is pondering.”
—Walter Lippmann
1 Canzoneri v. State Farm Fireplace & Cas. Co, et al., (Cal. Tremendous. Ct. – Los Angeles 2025); Ferrier v. State Farm Fireplace & Cas. Co, et al., (Cal. Tremendous. Ct. – Los Angeles 2025).