Fire victims in Los Angeles County have filed lawsuits against three large house insurers, alleging that they were routinely underinsured, leaving them with insufficient funds to replace or rebuild their homes following the Jan. 7 fires.
The twin lawsuits, filed Wednesday in Los Angeles County Superior Court, claim that for years, USAA, a Texas-based insurer that serves the military community, and two insurers affiliated with AAA underestimated the replacement cost of the homes, leading policyholders to purchase insufficient coverage.
“These families paid their premiums, trusted their insurers, and did everything right,” said attorney Gregory L. Bentley in a statement. “But when calamity struck, they discovered that their coverage was hardly more than an illusion. These businesses offered peace of mind, but actually left their customers stuck, destitute, and hopeless.”
The cases claim fraud, negligence, breach of contract, and other causes of action, and demand damages and changes to the insurers’ procedures.
A spokesman for CSAA Insurance Exchange, which primarily serves AAA members in Northern California, declined to comment on ongoing lawsuit. A spokeswoman for the Automobile Club’s Interinsurance Exchange, which services AAA members in Southern California, declined to comment.
USAA did not respond to a request for comment
The cases mark a new chapter in the litigation sparked by the devastating fires, which killed at least 29 people and damaged or destroyed over 16,000 homes and businesses in Altadena, Pacific Palisades, and other neighborhoods.
Several lawsuits have been filed against the California Fair Plan Association, the state’s insurer of last resort, saying that it is not effectively addressing smoke-damage claims resulting from the fires.
More than 100 of the state’s registered home insurers, including the CSAA, USAA, and the Interinsurance Exchange, are named in an April complaint accusing them of conspiring to dump policyholders and push them to join the FAIR Plan in order to decrease their claims risk. The plans’ policies are often more expensive and provide less coverage than regular commercial insurance.
The lawsuits filed on Wednesday, which are nearly identical except for details about the different defendants, allege that the problem of underinsurance is “pervasive” and stems from “cost estimator software many insurers use to recommend coverage limits to insureds,” as well as “poor design choices, perverse profit and commission incentives, volume business, and other shortcomings.”
James and Lisa Fulker, the principal plaintiffs in the action against the two AAA insurers, purchased a three-bedroom, two-bathroom, 1,872-square-foot home on Kingsport Drive in Malibu in 2020, according to the lawsuit.
The newly renovated home, which included a kitchen with a center island, quartz countertops, high ceilings, a fireplace, an entertainment patio, and a master suite with a walk-in closet and spa-like bath, had $713,000 in primary dwelling coverage and 125% extended replacement cost coverage, according to the lawsuit.
However, after the fires, the couple discovered that their coverage was inadequate, as they got estimates of at least $800 per square foot or more to rebuild, considerably above their insurer’s $380-per-square-foot projections, according to the lawsuit.
Ethan and Marijana Alexander, the principal plaintiffs in the USAA complaint, owned a 2,135-square-foot, four-bedroom, three-bathroom, near-custom home on Bienveneda Avenue in Pacific Palisades that they purchased in 2018.
According to the lawsuit, the residence was insured for $584,000 with a 25% home protection endorsement of $146,000.
Even with the new coverage, the complaint claims the couple lacks adequate insurance to rebuild, with USAA estimating a cost of $342 per square foot and the pair receiving estimates ranging from $850 to $1,000 per square foot, according to the lawsuit.
