‘A Really Broken System’: Litigators Say 2025 California Wildfires Expose ‘Cracks’ in the U.S. Insurance Industry

The recent California wildfires, which caused billions of dollars in damages, have underscored systemic flaws in the insurance industry and prompted a surge of litigation alleging that insurers underpaid or improperly denied claims. Attorneys note that many victims remain underinsured due to policies undervalued at the time of purchase, while major carriers now face antitrust and bad faith claims tied to the state’s FAIR Plan.

Allen Matkins Partner Alan Hearty noted that that plaintiffs will face “significant challenges” in these types of cases against insurance companies.

“Bad faith claims, for example, are tough to prove in California as the insured needs to prove that the insurer acted unreasonably in denying a claim,” Hearty said.

“Insurers will often rely on ambiguous provisions in a policy, which can weaken demands for punitive damages,” Hearty alleged. “Causation is another issue for plaintiffs, especially where a home is not burned down but is still damaged by smoke or ash, or the homeowners are forced to evacuate. The success of these lawsuits will often depend on strong documentation and using attorneys with expertise in litigating insurance disputes.”

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