Class Actions and Mass Torts Against Insurance Companies in California: A History

When an insurance company underpays, delays, or denies claims — not just for one policyholder but for thousands — individual lawsuits are often impractical. The amounts at stake for any single policyholder may not justify the cost of litigation, and the insurance company knows it. Class actions and mass torts exist to solve this problem: they allow policyholders who have been harmed by the same systematic conduct to band together and hold the insurer accountable.

California has been the epicenter of insurance class action litigation for decades. From the Northridge earthquake to the Palisades and Eaton fires, policyholders have used these legal tools to challenge insurer misconduct on a scale that individual lawsuits never could. This article covers the history, the mechanics, and what you need to know if you find yourself part of one.

Class Actions vs. Mass Torts: What’s the Difference?

These terms are often used interchangeably, but they are distinct legal mechanisms with different implications for policyholders.

Class action:A single lawsuit filed on behalf of a large group of people (the “class”) who were all harmed by the same conduct in essentially the same way. One or a few named plaintiffs represent the entire class. If the case succeeds or settles, the result applies to everyone in the class — unless they opted out. The key requirement is “commonality”: the insurer’s conduct must have affected everyone in the class the same way. For example, if an insurer used the same formula to depreciate sales tax on every claim, that’s a class action candidate.

Mass tort:Multiple individual lawsuits arising from the same event or conduct, consolidated for efficiency but not merged into a single class. Each plaintiff retains their own case, their own attorney, and their own damages calculation. In California state courts, this consolidation happens through a Judicial Council Coordinated Proceeding (JCCP). Mass torts are common in wildfire litigation because, while the cause of the fire may be common, each policyholder’s damages, coverage, and claim handling experience are different.

Why Insurance Companies Face Class Actions

Insurance class actions exist because insurers sometimes adopt company-wide policies, software systems, or claims-handling directives that systematically underpay or deny claims across thousands of policyholders. The conduct is not a rogue adjuster making a bad call — it is a corporate decision that affects every policyholder the same way. Common patterns include:

• Systematic depreciation practices— depreciating labor, sales tax, or items that do not depreciate, applied uniformly across all claims
• Software-driven underpayment— using claims valuation software (like Colossus or Xactimate profiles) “tuned” to reduce payouts below reasonable amounts
• Blanket coverage denials— issuing form-letter denials for an entire category of claims without individual investigation
• Coordinated market withdrawal— multiple insurers simultaneously leaving a market, forcing policyholders into inferior coverage
• Post-disaster claims suppression— implementing “deny first, negotiate later” strategies after catastrophic events when policyholders are most vulnerable

For a deeper look at these tactics, see our article on carrier claims tactics and bad faith insurance practices.

Landmark Cases: Northridge Earthquake Litigation (1994–2001+)

The 1994 Northridge earthquake — a 6.7-magnitude event that produced over $20 billion in insured losses — was a watershed moment for insurance class actions in California. Insurers faced a volume of claims they were unprepared for, and patterns of systematic underpayment quickly emerged.

Allstate:Shernoff Bidart Echeverria filed a class action alleging that Allstate adjusters had altered engineering reports and construction estimates to minimize claimants’ damages. Allstate ultimately agreed to reopen approximately 9,000 Northridge claims and allow independent inspections of policyholders’ homes.

State Farm:State Farm paid $100 million to settle a lawsuit brought by homeowners who alleged the company had eliminated earthquake coverage endorsements from certain policies without clearly notifying policyholders. Over 100 homeowners had discovered — only after the earthquake struck — that their earthquake coverage had been reduced or removed years earlier.

21st Century Insurance: In Basurco v. 21st Century Insurance Company, filed in 2001, policyholders brought a class action alleging systematic underpayment of Northridge claims. The litigation ultimately led to significant settlements.

The Northridge litigation was so consequential that the California Legislature enacted Code of Civil Procedure §340.9 in 2000, which revived Northridge earthquake insurance claims that had been barred by the statute of limitations. Attorneys recovered over $250 million in total settlements related to Northridge earthquake bad faith claims.

The McKinsey Playbook: Allstate’s “Boxing Gloves” and State Farm’s “Fire ACE”

Some of the most important insurance litigation in history has centered not on a single disaster but on insurer business practices designed by management consulting firm McKinsey & Company to systematically reduce claims payouts.

Allstate and the Claims Core Process Redesign (CCPR):In 1992, Allstate launched a pilot program developed with McKinsey that fundamentally changed how claims were handled. The strategy had three components: (1) discouraging claimants from hiring attorneys, because McKinsey’s data showed represented claimants received far higher payouts; (2) using a computer program called “Colossus” to systematically depress claim valuations; and (3) aggressively litigating against any claimant who rejected Allstate’s lowered offer — what internal McKinsey documents called the “boxing gloves” treatment. The phrase came from Allstate’s own presentations: put on the “good hands” for claimants who accepted low offers, and the “boxing gloves” for those who fought back.

In 2005, a class action was filed in Miller County Court in Texarkana, Arkansas, alleging civil conspiracy, breach of contract, breach of fiduciary duty, unjust enrichment, and fraud in connection with Colossus. In 2010, Allstate paid $10 million to settle a multi-state investigation by 41 state attorneys general concerning its use of Colossus software.

State Farm and “Fire ACE”:State Farm purchased a similar McKinsey program designed to turn the claims department into a profit center. Originally developed for auto claims, the strategy was expanded to fire, water, and roof damage for homeowner claims. The system allegedly incentivized claim denials — issuing an initial denial to test whether policyholders would challenge it, with those who accepted the denial receiving nothing further, while those who pushed back faced what plaintiffs described as “scorched-earth litigation tactics.” Multiple lawsuits have been filed challenging these practices, including in New Mexico and California.

These cases are significant because they reveal that claims underpayment is not always accidental or case-specific — it can be a deliberate corporate strategy. For more on how these tactics manifest in individual claims, see our article on how insurance carriers handle your claim.

Post-Katrina Insurance Litigation (2005+)

While Hurricane Katrina primarily affected the Gulf Coast, the litigation that followed set precedents that have influenced California insurance law. After Katrina devastated the Mississippi Gulf Coast in 2005, hundreds of lawsuits disputed insurers’ reasoning about damage causation — specifically, whether damage was caused by wind (covered) or storm surge/flooding (excluded).

State Farm and engineering report manipulation:State Farm was found to have changed damage reports to attribute homeowner damage to flooding rather than wind, allowing the company to deny wind-damage claims. In 2022, State Farm agreed to pay the federal government $100 million to settle allegations that it defrauded the United States through its handling of Katrina claims. State Farm also settled with the Mississippi Attorney General’s office for $12 million in 2021.

USAA bad faith verdict: In Minor v. USAA, the Mississippi Supreme Court affirmed a $10.5 million punitive damage verdict against USAA for bad faith denial of a Katrina claim. Evidence revealed that USAA concealed engineering reports that supported the family’s claims, intentionally delayed payments, and refused to pay amounts that USAA’s own internal documents indicated were owed. The case was filed in 2008 and litigated for over 15 years before final resolution.

The Katrina cases demonstrated a tactic California policyholders should be aware of: insurers manipulating expert reports to create a pretext for denial. For more on this, see our article on bad faith damages.

Thomas Fire and Montecito Mudslide Litigation (2017–2018)

The Thomas Fire, which began on December 4, 2017, consumed over 280,000 acres in Ventura and Santa Barbara counties. In January 2018, the Montecito mudslides claimed 23 lives and destroyed 10% of the homes in Montecito.

A class action was filed by Cappello & Noël LLP and Lieff Cabraser Heimann & Bernstein against Southern California Edison, alleging that SCE knowingly violated safety procedures that led to the fire and resulting mudslides. The cases were consolidated into a coordinated proceeding in Los Angeles County Superior Court. In September 2020, SCE reached a $1.16 billion settlement with insurance companies for subrogation claims. Individual plaintiffs’ cases were resolved through a damages-only adjudication protocol established as part of the JCCP.

While most of this litigation targeted the utility rather than the insurance companies directly, the cases also produced evidence of insurer underpayment practices — particularly in how carriers calculated depreciation and replacement costs for high-value homes.

Camp Fire / Paradise Litigation (2018+)

The 2018 Camp Fire destroyed the town of Paradise and killed 85 people, making it the deadliest and most destructive wildfire in California history at the time. The resulting litigation was massive — but it illustrates an important distinction between class actions and mass torts.

No class action was certified in the Camp Fire litigation. Instead, individual lawsuits were coordinated into JCCP No. 4955 in San Francisco County Superior Court. Each claimant filed a separate case, retained their own attorney, and calculated their own damages. When PG&E filed for bankruptcy in 2019, the civil lawsuits were automatically stayed, and all claims were incorporated into the bankruptcy proceedings. PG&E emerged from bankruptcy in 2020 after agreeing to a $13.5 billion settlement with fire victims.

The Camp Fire litigation is a good example of why many wildfire cases proceed as mass torts rather than class actions: every homeowner’s damages were different, every policy was different, and every claim handling experience was different. A class action requires common questions to predominate — and in wildfire cases, the individual questions often outweigh the common ones.

Palisades and Eaton Fire Litigation (2025–Present)

The January 2025 Palisades and Eaton fires produced some of the most significant insurance class action litigation in California history — not just for the scale of the losses, but for the novel legal theories being advanced.

The coordinated-withdrawal antitrust class actions:In April 2025, Shernoff Bidart Echeverria LLP and Larson LLP filed two landmark complaints in Los Angeles County Superior Court — Ferrier et al. v. State Farm Group et al. and Canzoneri v. State Farm Group et al.— against State Farm, Farmers, and more than 100 other insurance carriers. The lawsuits allege that beginning in early 2023, these insurers collectively withdrew from offering competitive fire insurance policies in targeted areas including Pacific Palisades, Malibu, and Altadena. By colluding to cancel existing policies and refusing to write new ones, the insurers allegedly forced property owners onto the California FAIR Plan with its drastically lower coverage limits and higher premiums.

The legal claims include:

• Cartwright Act violations— California’s antitrust statute, alleging the insurers conspired to restrain trade by collectively refusing to compete in the wildfire-risk market. The Cartwright Act provides for treble damages (three times the actual damages sustained).
• Unfair Competition Law (UCL) violations— seeking restitution of the inflated premiums policyholders paid to the FAIR Plan and injunctive relief to prevent further anticompetitive practices.
• Negligence and fraudulent concealment— alleging the insurers knew their coordinated withdrawal would leave policyholders catastrophically underinsured.

The Palisades Fire alone burned nearly 24,000 acres, destroying 6,837 properties and damaging another 973 structures. Plaintiffs in the Ferrier lawsuit are seeking treble damages, attorney’s fees, costs, and interest. These cases remain in early stages as of 2026.

For background on the market conditions that gave rise to this litigation, see our article on California’s insurance crisis.

FAIR Plan Class Actions: Smoke Damage Denials

The California FAIR Plan — the state’s insurer of last resort — has itself become the target of significant class action litigation. Kerley Schaffer LLP has been at the forefront, filing proposed class actions dating back to 2017 in Alameda and Butte counties alleging that the FAIR Plan systematically denied smoke damage claims by applying an unlawfully narrow definition of covered loss.

The dispute centers on the FAIR Plan’s definition of “direct physical loss.” The FAIR Plan adopted policy language requiring that smoke damage involve “permanent physical changes” to the property — and took the position that if smoke damage could only be detected through laboratory testing (as opposed to visible, perceptible damage), it was not covered.

The landmark ruling:On June 25, 2025, a Los Angeles Superior Court judge ruled that the FAIR Plan’s smoke damage policy was illegal, striking down the requirement that damage must be “perceptible” rather than detectable by laboratory testing. The court found that the FAIR Plan had violated insurance law by denying smoke damage claims based on overly narrow standards.

Following that ruling, the California Department of Insurance took action. In May 2025, Insurance Commissioner Ricardo Lara sent a formal legal directive deeming the FAIR Plan’s “permanent damage” policy language unlawful and unenforceable. In July 2025, the CDI filed a cease-and-desist order with penalties against the FAIR Plan. Kerley Schaffer has since teamed up with Edelson PC, a Chicago-based litigation firm, to represent victims of the Palisades and Eaton fires whose FAIR Plan smoke damage claims were denied under this same policy.

For more on the FAIR Plan’s coverage and limitations, see our California FAIR Plan guide.

How Class Actions Work: The Procedural Basics

Understanding the mechanics of a class action can help you make informed decisions if you find yourself part of one.

1. Filing and class definition:A named plaintiff files a lawsuit on behalf of a proposed class — for example, “all California policyholders of [Insurer] whose claims were denied using [specific practice] between [dates].” The named plaintiff must have claims typical of the class.

2. Class certification: This is the critical hurdle. The plaintiff must convince the court that the case meets the requirements for class treatment, typically including:

• Numerosity— the class is so large that joining all members individually would be impractical
• Commonality— there are questions of law or fact common to the class
• Typicality— the named plaintiff’s claims are typical of the class
• Adequacy— the named plaintiff and class counsel will fairly and adequately protect the interests of the class
• Predominance— common questions predominate over individual ones
• Superiority— a class action is superior to other methods of adjudication

3. Notice:If the class is certified, class members receive notice — typically by mail, publication, or both — informing them of the lawsuit, their rights, and deadlines. This is often the first time most class members learn they are part of the case.

4. Opt-out period:Class members have a specified window to opt out of the class. If you opt out, you are not bound by the class outcome — but you also do not benefit from any class settlement or judgment. You preserve your right to file an individual lawsuit.

5. Settlement or trial: Most class actions settle. The court must approve any settlement as fair, reasonable, and adequate before it becomes binding on the class. Class members typically receive a second notice with settlement terms and another opportunity to object.

JCCP: California’s Mass Tort Coordination Process

When many individual lawsuits are filed across different California counties arising from the same event — a wildfire, a product defect, an insurer practice — the Judicial Council may coordinate them into a single proceeding called a JCCP (Judicial Council Coordinated Proceeding).

Unlike a class action, a JCCP does not merge individual claims. Each plaintiff retains their own attorney and their own case. The coordination judge — typically experienced in complex litigation — manages pretrial proceedings: discovery, motions, case schedules, and liaison counsel. This reduces duplication and cost for everyone, while preserving each plaintiff’s individual claim.

Major wildfire JCCPs have included the Southern California Fire Cases (JCCP 4965, covering the Thomas Fire and related events) and the Camp Fire cases (JCCP 4955). The 2025 Palisades and Eaton fire litigation is producing its own coordinated proceedings.

The practical benefit for policyholders is significant: shared discovery means insurers cannot hide documents from one plaintiff that were produced to another. Coordinated motion practice means legal rulings apply across all cases. And some plaintiffs may later opt into global settlements, while others may return to their original court for trial if no resolution is reached.

What Policyholders Should Know

If your insurance company has underpaid, delayed, or denied your claim, and you suspect the same thing is happening to other policyholders, here is what you need to understand.

How to Find Out If You’re Part of a Class

• Check your mail carefully. Class action notices often look like junk mail. If you receive a notice from a court or a law firm about a settlement involving your insurance company, read it thoroughly.
• Search your insurer’s name plus “class action” or “settlement” online. Websites like the Consumer Law Group of California, Top Class Actions, and United Policyholders track active cases.
• Contact the California Department of Insurance at (800) 927-4357. CDI tracks enforcement actions and can direct you to relevant litigation.
• Talk to a bad faith attorney or public adjuster. Professionals who work insurance claims often know about active class actions before they are widely publicized.

Should You Stay In or Opt Out?

This is one of the most important decisions a policyholder can face, and there is no universal answer.

• Stay in the class if:Your individual damages are relatively small (under $10,000–$25,000), you do not want to hire your own attorney, and the settlement terms seem reasonable. Class membership costs you nothing and requires no effort.
• Consider opting out if: Your individual damages are large (six figures or more), your claim has unique facts that the class settlement does not account for, or you believe you can recover more through individual litigation or a bad faith action.
• Always consult an attorney before opting out. Once you opt out, you cannot opt back in. And if you opt out but never file your own lawsuit, you recover nothing.

The Insurance Industry’s Response: Arbitration Clauses and Class Action Waivers

Facing the threat of class action litigation, insurance companies have increasingly inserted forced arbitration clauses and class action waivers into their policy language. These provisions require policyholders to resolve disputes through private arbitration rather than the court system, and to waive their right to participate in class actions.

The legal landscape: In AT&T Mobility LLC v. Concepcion(2011), the U.S. Supreme Court held that the Federal Arbitration Act (FAA) preempts state laws that prohibit class action waivers in arbitration agreements. This overruled California’s prior rule from Discover Bank v. Superior Court (2005), which had held that class action waivers in standard-form consumer contracts were often unconscionable and unenforceable.

Important California exceptions: Despite Concepcion, California courts have carved out significant limitations:

• When the California Arbitration Act (CAA) applies rather than the FAA, courts may still refuse to enforce class action waivers on grounds of unconscionability or public policy.
• Waivers of representative actions under the Private Attorneys General Act (PAGA) are not enforceable, even under Concepcion.
• Many insurance policies — particularly homeowner policies regulated by the California Department of Insurance — do not contain arbitration clauses at all, because CDI has historically scrutinized such provisions during the rate approval process.
• California Insurance Code §11580.2 mandates arbitration for certain uninsured motorist disputes but does not extend that mandate to property insurance claims.

The Bigger Picture

Class actions and mass torts serve a critical function in the insurance ecosystem: they are the mechanism by which systematic misconduct gets exposed and corrected. Without the Northridge class actions, Allstate might never have reopened 9,000 claims. Without the McKinsey litigation, the “boxing gloves” strategy might still be a secret. Without the FAIR Plan lawsuits, smoke damage denials based on an unlawful policy definition might still be standard practice.

For individual policyholders, the most important takeaway is this: if your insurer is treating you poorly, they are probably treating other policyholders the same way. You are not alone, and you have options. Whether that means joining a class, filing an individual bad faith action, or hiring a public adjuster to fight for the full value of your claim, the first step is always the same — document everything and know your rights under the California Fair Claims Settlement Practices regulations.