Alameda County DA Takes On Homeowners Insurance Companies

Alameda County District Attorney Pamela Price announced a lawsuit against several homeowners insurance companies Tuesday, accusing them of defrauding customers and leaving them without adequate coverage when disaster strikes.

The companies are all affiliates of Farmers Insurance, which has remained in California even as some affiliates and competitors have pulled out.

According to Price, the companies are using a software application that improperly calculates replacement costs when a home is damaged or destroyed. Price said it's based on a person’s zip code, which makes it another form of redlining. The DA is hoping the insurers will agree to adjust their software so that replacement values are calculated more accurately.

In a statement, Farmers Insurance said the assumptions underlying the suit are false.

"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."

Alameda’s lawsuit comes amid a statewide insurance crisis that has left many people uninsured or paying skyrocketing premiums. In the past year, several homeowners insurance companies have limited or exited California’s market, citing high risk of wildfires and other natural disasters that make their business models untenable. Needless to say, there are concerns that the suit could backfire, pushing more insurance companies away from the market.