The homeowners say USAA and AAA underpaid them and now they can't rebuild
of ConsumerAffairsJune 9, 2025
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Homeowners who lost properties in Januarys deadly LA wildfires are suing USAA and AAA insurers, alleging underpaid claims left them unable to rebuild.
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The lawsuits accuse the insurers of fraud and negligence for grossly underestimating rebuilding costs and failing to provide adequate coverage.
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The legal action comes amid a wider insurance crisis in California, where wildfire claims have topped $12 billion and pressure mounts on state regulators.
Several Los Angeles-area homeowners who lost their houses in the devastating January 7 wildfires have filed lawsuits against three major insurance providers, alleging they were left underinsured and financially stranded after the disaster.
The lawsuits, filed this week in Los Angeles County Superior Court, accuse USAA and two AAA-affiliated insurers of negligence and fraud, claiming the companies grossly underestimated replacement costs and failed to fulfill their coverage promises.
These families paid their premiums, trusted their insurers, and did everything right, said Gregory L. Bentley, an attorney with Bentley & More, which is representing the plaintiffs. But when disaster struck, they learned their coverage was little more than an illusion.
Homes burned, claims underpaid
The lawsuits describe how fire survivorssome of whom lost custom and renovated homeswere left unable to rebuild after receiving payouts that fell well short of market rebuilding costs.
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One plaintiff family insured with AAA owned a three-bedroom, two-bathroom, 1,872-square-foot home in Malibu, which had $713,000 in primary dwelling coverage and 125% extended replacement coverage. After the fire, construction estimates surged to over $800 per square foot, but the insurer had based coverage on just $380 per square foot.
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A USAA policyholder had a 2,135-square-foot, four-bedroom, three-bathroom near-custom home in Pacific Palisades, insured for $584,000 with a 25% home protection endorsement. The total coverage still fell far short of rebuilding costs.
Insurers respond
USAA, in a statement, acknowledged receipt of the lawsuit and said it is under review. USAAs dedication to outstanding member service is widely recognized, the spokesperson said, noting that the insurer had deployed teams within days of the wildfire and has so far paid nearly $1.4 billion across wildfire-related claims. The company stated it has settled more than 90% of homeowner claims and remains committed to finalizing the remainder.
AAA did not immediately comment.
Broader insurance crisis in California
The lawsuits underscore growing tensions in Californias homeowners insurance market, already rocked by escalating wildfire risks and insurer exits. The January 7 wildfires claimed 29 lives and damaged or destroyed more than 16,000 properties across the state. According to the California Department of Insurance, 37,749 claims have been filed, and $12.1 billion in payouts have been made.
Amid mounting losses, major carriers including State Farm have requested rate increases, and the states insurer of last resortthe California FAIR Planreceived approval for a $1 billion assessment on admitted insurers to help cover wildfire claims.
Seeking accountability amid crisis
While the legal outcomes remain to be seen, the lawsuits represent a growing demand for accountability from insurers amid Californias escalating climate and coverage crisis. Plaintiffs hope to not only recover financial losses but also spark industry-wide changes to how home values are assessedand how well homeowners are protected when catastrophe strikes.
People thought they were protected, Bentley said. Instead, theyve been left homeless in the middle of an insurance system that failed them when they needed it most.
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