Mere days into the new year of 2025, Los Angeles faced the highly destructive Palisades Fire, which destroyed some 6,837 structures, including two public schools, four churches, historical sites and more than 5,400 homes. Now, as a suspected arsonist has been identified, a perfect firestorm of lawsuits, insurance issues and blame is circulating.
The damage caused by the fire has been exacerbated by several factors. Its scale and devastation are simply unprecedented, leading to a massive volume of insurance claims. However, the dire state of the insurance industry in California is also playing a role.
Even before the Palisades Fire, several of the country’s largest insurers, including State Farm, Farmers and Allstate, either ceased or severely limited writing new policies for home and fire insurance, citing inflation, increased wildfire risk and the raised costs of reinsurance.
Related: Farmers Eliminating Homeowners Insurance Policy Cap in California
Much of the insurance industry’s woes in the Golden State can be traced to Prop. 103, the 1988 law that gave the California Department of Insurance the power to approve or even reduce rates. Raising rates became a months- or even years-long political and regulatory process, hampering their ability to adjust rates to cover actual losses or increased risk.
Now, with what was originally the insurer of last resort instead becoming one of the largest insurers in the largest state in the nation, the situation is growing increasingly untenable. As of February, 3,621 claims have been filed with FAIR, and the plan has paid over $1.2 billion to policyholders in claims related to the Palisades and Eaton Fire, in Los Angles, which ignited only a week later.
The government run plan is now beset by lawsuits, alleging that the insurer is failing to cover smoke damage claims as it also seeks to raise rates by 35.8%, the fourth FAIR Plan increase since 2021. The plan further faces a funding gap between its cash reserves and reinsurance obligations, putting it in a highly precarious situation.
While California’s insurance system is strained, a potential culprit has been identified and apprehended. The man accused of “maliciously” starting the brush fire that grew into the deadly inferno, allegedly has a history of pyromania. Twelve died in the tragic fire.
However, the ire of the people impacted has now been directed at the municipality of Los Angeles, the LA Department of Water and Power and the state’s Parks and Recreation Department, with a $10 billion class action lawsuit filed by over 3,300 victims of the fire.
Related: LA County Launches Investigation Into State Farm Over Wildfire Claims
This litigation class accuses these public agencies of ignoring their own brush clearance ordinances, and failure to inspect and maintain the 117-million-gallon Santa Ynez Reservoir, which the litigants and the media claim was empty, causing hydrants to run dry. They also claim multiple communication missteps, allowing the fire to grow uncontrollably.
Former and current LADWP officials acknowledged that if the reservoir held water, higher elevation areas of Palisades would have had more water pressure. Dating to January 2024, maintenance issues were flagged as a substantial problem, requiring repair, leading the body of water to be drained shortly thereafter.
The precursor fire, set by the accused originated in the Topanga State Park, is now known as the Lachman fire. It was thought by the L.A. Fire officials to have been fully extinguished.
Forensics now lead us to believe that the fire was able to smolder and burn underground, rekindling due to the heavy winds on Jan. 7, 2025. Among the lawsuit’s accusations is that the state failed to properly inspect the area of the Lachman fire and ensure that no embers still smoldered
Having spent six years as fire commissioner for a 150-person professional fire department in a city roughly 100,000 residents, I can say that while I deeply sympathize with the plight and frustration of those affected by the devastating fires, the fact remains that many of the charges being lain at the feet of various city and state agencies will be difficult to prove in court.
The California Code of Government § 850 dictates that “neither a public entity nor a public employee is liable for failure to establish a fire department or otherwise to provide fire protection service.” This immunity already insulates these officials from liability. Even if these government entities were found liable, the costs would simply be passed onto taxpayers, directing money away from rebuilding or future prevention efforts.
Furthermore, it is unrealistic to expect the authorities to be able to comb over every inch of a 17-square-mile park. Having been responsible for fire management for a city with a total area of 36-plus square miles, with varied topography, a diversity of structures and limitations in each unique neighborhood, I can say with certainty that it would be impossible for most any fire department to constantly monitor a recent hot zone for a potential spark, without leaving other portions of the municipality unprotected.
The fact remains that 39% of homes in the U.S. that are determined to be in either severe or extreme risk areas for fire damage are located in California.
As the hard work of rebuilding begins, the state must not only reexamine the policies that led up to this moment but also reimagine its strategies for the future, by requiring more resilient types of construction.
While state and local leaders have banned duplexes and other types of denser housing from being built in the Pacific Palisades, according to the Pew Research Center, modern, multifamily buildings have one-sixth the rate of fire death compared to single-family houses.
Other measures can be taken to protect homes and reduce risk.
A 2022 report by the National Institute of Standards and Technology, Cal Fire and the Insurance Institute for Business and Home Safety compiled more than 50 ways that property owners could retrofit their homes to protect against fires. The recommendations range from sealing garage doors to keep out embers to installing double-paned tempered glass windows, which are less likely to shatter from heat, allowing oxygen to serve as an additional fuel source.
Many of these recommendations do appear in California’s building code, which was enacted in 2008, and homeowners who embrace them may have an easier time securing insurance coverage for their property. However, these code requirements come with a substantial cost of implementation, something everyday homeowners might not be able fund on their own.
The largest state in the union needs to take a hard look at its current policies; otherwise, the state will never have a healthy and sustainable insurance market. From Prop. 103 reforms, to rebuilding and other fire prevention measures, action is needed to reduce fire risk. Maintaining the status quo will only lead to more insurers leaving California and increased reliance on the government managed and subsidized FAIR, resulting in inadequate coverage for Californians everywhere.
Coffey is the founding partner of Coffey Modica, an insurance litigation firm with offices across five states. He’s a veteran litigator handling major claims and disasters up to $250 million. Coffey previously served for six years as fire commissioner of the City of Norwalk, Connecticut.
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Lawsuits
California