Alameda Co. DA claims insurers are defrauding CA homeowners, engaging in unlawful business practices

ByLeslie Brinkley KGO logo
Wednesday, May 22, 2024
Alameda Co. DA claims insurers are defrauding homeowners
Alameda County District Attorney Pamela Price claims insurers are defrauding homeowners, engaging in unlawful business practices.

OAKLAND, Calif. (KGO) -- Alameda County District Attorney Pamela Price came out swinging Tuesday against insurance companies accusing them of "operating a widespread scheme" on California consumers, leaving them underinsured in a disaster like a wildfire.

Alameda County's Consumer Justice Bureau filed the lawsuit against some major insurance carriers representing 15% of the homeowners' policies in the state of California. All are affiliates of Farmers Insurance and include Mid-Century and others who DA Price says are engaging in unlawful business practices.

RELATED: What's California doing to address the insurance crisis? The possible solutions and changes needed

"These insurance companies have utilized a software application that allows them to essentially defraud homeowners. One of the features of the 360 value software that we are alleging improperly estimates the replacement cost is that it's based on zip code, so it's another way of redlining," said Price.

The DA's office claims the companies offer lower prices to entice consumers but leave them woefully undercovered if they had to actually rebuild their home after a fire or natural disaster by using a general formula instead of specifics about a property like the slope it's built on or the roofing materials.

The lawsuit was filed three weeks ago by the DA's office says they still have not gotten a response from the targeted insurance companies.

MORE: State's wildfire insurance crisis is so bad, even CAL FIRE stations are struggling to get coverage

Now the question is, could the lawsuit cause insurers to back away from the California market?

"If an insurance company chooses not to unfairly cheat residents of California then that's a good thing that opens the door to insurance companies that are willing to comply with California law," said Price.

The DA said settling this lawsuit would mean insurers would have to make significant software modifications on how replacement value is calculated and covered in California.

State Farm says its not renewing 30,000 homeowners insurances in California including in high fire risk areas.

Farmers Insurance released the following statement in response to Price's lawsuit:

"The allegations in the Complaint are simply incorrect, and we do not seek to provide low replacement cost estimates. We intend to discuss this with the DA's office. We look forward to addressing these concerns and defending our position."

Now Streaming 24/7 Click Here