Los Angeles County fire victims sue AAA and USAA, alleging insurance fraud
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Los Angeles County fire victims have filed lawsuits against three large home insurers alleging they were systematically underinsured, leaving them without enough money to replace or rebuild their homes after the Jan. 7 blazes.
The twin lawsuits, filed Wednesday in Los Angeles County Superior Court, allege that USAA, a Texas-based insurer that serves the military community, and two insurers affiliated with AAA for years underestimated the replacement cost of the homes, lulling the policyholders into buying inadequate coverage.
“These families paid their premiums, trusted their insurers, and did everything right,” attorney Gregory L. Bentley said in a statement. “But when disaster struck, they learned their coverage was little more than an illusion. These companies promised peace of mind, but instead left their members stranded, homeless, and hopeless.”
The lawsuits allege fraud, negligence, breach of contract and other causes of action, and seek damages and reform of the insurers’ practices.
Two Los Angeles County Superior Court lawsuits accuse dozens of California home insurers of dropping policyholders and forcing them onto the FAIR Plan — the state’s insurer of last resort — where polices cover less and cost more.
Bekah Nelson, lead communications director for USAA, said that the company was reviewing the lawsuit and could not comment on specifics, but said “USAA’s dedication to outstanding member service is widely recognized.”
“When wildfires struck Southern California, our teams were on the ground within days, working to support our members in their time of need. To date, we have paid nearly $1.4 billion to help members recover from their losses,” she said, adding the company has made payments on more than 90% of homeowner claims.
A spokesperson for CSAA Insurance Exchange, which primarily serves AAA members in Northern California, said it does not comment on pending litigation. A spokesperson for the Interinsurance Exchange of the Automobile Club, which serves AAA members in Southern California, also declined comment.
The lawsuits open a new front in the litigation that has been spawned by the catastrophic fires, which caused at least 29 deaths and damaged or destroyed more than 16,000 homes and businesses in Altadena, Pacific Palisades and other communities.
Several lawsuits have been filed against the California Fair Plan Assn., the state’s insurer of last resort, alleging that it is not adequately handling smoke-damage claims arising out of the fires.
A couple whose home was damaged in the Palisades fire filed a lawsuit Monday against the California FAIR Plan, the state’s home insurer of last resort, seeking to force the insurer to turn over claims documents.
More than 100 of the state’s licensed home insurers, including the CSAA, USAA and the Interinsurance Exchange, are defendants in an April lawsuit accusing the companies of colluding to drop policyholders and force them onto the FAIR Plan in order to reduce their claims exposure. The plan’s policies typically cost more and offer less coverage than traditional commercial insurance.
The lawsuits filed Wednesday, which are virtually identical except for details pertaining to 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.”
The lead plaintiffs in the lawsuit filed against the two AAA insurers, James and Lisa Fulker, bought 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 featured 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, the lawsuit states.
Ten victims of the Palisades and Eaton fires sued the Fair Plan, accusing California’s insurer of last resort of mishandling smoke damage claims.
After the fires, however, the couple found their coverage was inadequate as they received estimates of at least $800 per square foot or more to rebuild, far exceeding the $380-per-square-foot calculations of their insurer, the lawsuit states.
The lead plaintiffs in the USAA lawsuit, Ethan and Marijana Alexander, had a 2,135-square-foot, four-bedroom, three-bathroom, near-custom home on Bienveneda Avenue in Pacific Palisades that they bought in 2018, according to the lawsuit.
The home had $584,000 in dwelling coverage and a 25% home protection endorsement of $146,000, the lawsuit states.
Even with the additional coverage, the complaint alleges the couple don’t have adequate insurance to rebuild, with USAA calculating the cost at $342 per square foot and the couple receiving estimates at more than $850 to $1,000 per square foot, the lawsuit states.
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