The United States Department of Justice (DOJ) does not file Statements of Interest in state court cases lightly. Indeed, I cannot remember when it has done so in a single state-filed insurance case. When it does, it signals something much bigger than a routine dispute between policyholders and insurers. The recent filing in the Los Angeles wildfire litigation 1 raises a number of troubling questions. Are we seeing more than bad claims handling? Are we seeing a system that may be intentionally structured to disadvantage policyholders? Is this just a political stunt by an administration that has called out insurers for harming policyholders, as noted in “Donald Trump and Chip Merlin Agree—Ron DeSantis and Florida Republican Leadership Have Sold Out to Insurance Company Lobbyists”?
The DOJ filing focuses on allegations that multiple insurers, including State Farm, engaged in a coordinated refusal to issue or renew fire insurance policies, effectively pushing homeowners into the California FAIR Plan. The FAIR Plan is more expensive, offers less coverage, and was never intended to become the default marketplace. It was designed as a safety net, not a destination.
The legal theory is not complicated. If competitors agree to stop competing for customers and instead steer them into a more limited and expensive alternative, that can constitute a group boycott. The Supreme Court has long held that such conduct, when used to extract economic advantage, may violate federal antitrust laws. I discussed this topic six years ago in Insurance “Anti-Trust and The McCarren-Ferguson Act: Boycotts.”
What makes this situation particularly troubling is that the alleged conduct does not stand alone. It sits alongside what California insurance regulators have already found in their market conduct examination: widespread delays, underpayments, miscommunications, and failures in handling wildfire claims. Those findings describe the results. The DOJ filing begins to point toward possible motives and causes.
If insurers are reducing their exposure by pushing policyholders out of the traditional market while simultaneously underpaying or delaying claims for those who remain, the issue is no longer just claims handling. It becomes a question of whether the system itself is being manipulated.
The insurance industry often relies on the McCarran-Ferguson Act to argue that its conduct is shielded from federal antitrust scrutiny. But that protection has limits. The DOJ makes clear that boycotts, especially those involving coercion or coordinated refusal to deal, are not protected.
I have said repeatedly that I do not want to see any insurer fail. That is not good for policyholders, communities, or the many good people working inside these companies. But when findings like these emerge, insurance leadership has an obligation to do more than defend the status quo. Without transparency, all of this risks becoming a public relations exercise. Statements about fairness and integrity are important, but they must be backed by visible action. If policyholders cannot see what is being done to correct past mistakes and prevent future ones, their trust in the insurance product will continue to erode.
The DOJ filing does not prove that a coordinated scheme occurred. It does not determine liability. But it shines a light on conduct that, if true, goes beyond individual claim disputes and into the structure of the market itself.
The question is no longer just whether claims were mishandled. Instead, it is whether the gates to the insurance marketplace are being quietly closed, and policyholders are being pushed into narrower and more expensive options. If so, then we are not just dealing with bad claims practices. We are dealing with something much bigger.
Thought For The Day:
“The test of leadership is not to put greatness into people, but to elicit it, for the greatness is there already.”
— James Buchanan
1 Notice of Statement of Interest off the United States, Ferrier v. State Farm Fire & Cas. Co., No. 25STCV12117 (Cal. Super. Ct. – Los Angeles May 1, 2025).
