California homeowners accuse insurers of ‘nefarious conspiracy’ to deny them coverage and force them onto costly ‘last resort’ FAIR plan — how to protect your home from being underinsured

What do the lawsuits allege?

The lawsuit accuses dozens of insurance companies — including household names like State Farm, Allstate, Farmers, Liberty Mutual, and subsidiaries of Berkshire Hathaway — of coordinating a “group boycott” in high-risk fire zones.

Homeowners claim insurers illegally worked together to pull out of wildfire-prone regions, leaving families scrambling for basic coverage. According to the suit, this wasn’t just about risk — it was about profit. By cutting off access to private coverage, the complaint argues, insurers could funnel policyholders into the FAIR Plan, which they jointly own and manage. That plan, while meant to be a safety net, places a heavier burden on consumers with higher premiums and reduced protections.

Attorney Robert Ruyak, who filed the complaint on behalf of the homeowners, told NBC News that the FAIR Plan had become a tool for insurers to limit their liability. Because insurers can recoup some losses through premium hikes on the FAIR Plan, they allegedly had a financial incentive to shrink the private market.

“They knew that they could force people, by dropping insurance, into that plan which had higher premiums and far lower coverages. They realized that they could take this device, which is to protect consumers, and turn it into something that protected them,” Ruyak said.

The FAIR Plan was created by California lawmakers in the 1960s to ensure homeowners in high-risk areas could still get fire insurance. It’s not funded by taxpayers but rather by insurance companies operating in the state, which are also responsible for running and managing the program.

That’s key to the lawsuit. Because insurers collectively manage the FAIR Plan, the plaintiffs argue they had both the power and financial motivation to steer customers into it. The plan limits their exposure to catastrophic wildfire losses, while allowing them to raise premiums if losses occur. However, it offers homeowners bare-bones coverage and often requires an additional private policy, leaving many families underinsured when disaster strikes.

However, insurance expert Karl Susman doesn't think the court will find collusion.

"Insurance companies compete; they don't collude…. It’d be like having a bunch of restaurants, and one of them finds out there's an ingredient making people sick. They're not running around to other restaurants saying, 'Go ahead and use it — maybe you'll get more people sick and they'll get more business.'" Susman told NBC.

The lawsuit is a symptom of California's continuing insurance crisis, which is likely to worsen in the coming years.

A 2023 NBC News analysis estimated that one in four U.S. homes may be at risk of a “climate-induced insurance shock,” where rising premiums or dropped policies leave people without protection. As climate change fuels more frequent and destructive fires, homeowners across California — and beyond — are finding it harder to get traditional coverage.

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Struggling to get insurance? Here's what to do

With private insurers pulling out of fire-prone areas, many California homeowners are left scrambling for options. While the FAIR Plan has its flaws — and is now under legal scrutiny — it may still be better than going without coverage entirely.

Here are a few tips for navigating the crisis:

1. Shop around and work with a broker:

Don’t assume one denial means you’re out of options. Shop around. Independent brokers may be able to help you find a specialty insurer that is still writing policies in your area. Consider small insurance companies, or one limited to military members and their families, like USAA, if this option is available to you.

2. Fireproof your home — and document it:

New legislation in California aims to reward homeowners who reduce wildfire risks. Known as AB 226, the law will allow insurers to offer discounts for fire mitigation efforts, such as clearing brush, installing ember-resistant vents, or using fire-resistant roofing. These efforts could not only lower premiums but also make your home more insurable.

3. Consider hybrid coverage:

Many homeowners combine a basic FAIR Plan policy with supplemental coverage from a surplus-lines insurer to get more complete protection. It may be more expensive, but it’s often the only way to fully insure a home in high-risk zones.

4. Don’t let your policy lapse:

If you have insurance, do everything you can to keep it. A lapse — even a short one — can make it much harder to get reinsured.

While the lawsuits raise serious questions about how the FAIR Plan is being used, most experts agree it’s still a vital safety net — especially as new regulations and legislative fixes are passed through the system. “We just have to stand by and hope things will get better with these plans they have coming,” Susman said.