Homeowners Take Legal Action Against USAA and AAA Insurers Over Los Angeles Wildfire Coverage Disputes

Several California homeowners are suing USAA and two AAA-affiliated insurers, alleging that inadequate insurance payouts left them financially unable to rebuild after the devastating January 7 Los Angeles wildfires. The lawsuits, filed in Los Angeles County Superior Court, claim the insurers miscalculated replacement costs, resulting in underinsurance that fell far short of actual rebuilding expenses.

Attorney Gregory Bentley, representing the plaintiffs, asserts the insurers engaged in fraud and negligence, leaving families stranded despite faithfully paying premiums. One case involves a Malibu home insured for $713,000 with extended replacement coverage but faced reconstruction estimates more than double what the insurer calculated. A second case alleges a similar underinsurance gap for a Pacific Palisades residence covered by USAA.

USAA responded, stating it has paid nearly $1.4 billion on over 90% of wildfire-related claims and remains committed to settling all valid claims. AAA has not yet commented on the lawsuits. The fires caused catastrophic damage across the region, with 29 fatalities and over 16,000 properties affected.

The broader context includes over 37,000 insurance claims and more than $12 billion in payouts across the industry. The financial toll has pushed carriers like State Farm to request rate increases and led to a $1 billion assessment by the California FAIR Plan on insurers in the admitted market, with state regulators now deeply involved in managing the fallout.