Bentley & More LLP: Homeowners Sue USAA and AAA, Alleging Systematic Underinsurance in the Wake of LA County Wildfires

LOS ANGELES, June 5, 2025 /PRNewswire/ -- Today, a group of California homeowners filed suit against two of the nation's largest homeowner's insurance companies, United Services Automobile Association (USAA) and the American Automobile Association (AAA), alleging widespread fraud, negligence, and bad faith stemming from the devastating wildfires that swept through Los Angeles County in January 2025.

The lawsuits, filed in California Superior Court, accuse USAA and AAA of systematically underinsuring thousands of homeowners despite years of advertising their expertise in estimating rebuilding costs and assuring policyholders they would be fully protected in the event of a total loss.

Now, after entire neighborhoods have been reduced to rubble by the Palisades and Eaton Fires, those same homeowners say they are discovering the truth: their policies fall hundreds of thousands and sometimes over a million dollars short of the actual cost to rebuild. Because of the failure of USAA and AAA, many homeowners will never be able to return to the houses they called home for decades.

"These families paid their premiums, trusted their insurers, and did everything right," said attorney Gregory L. Bentley of Bentley & More. "But when disaster struck, they learned their coverage was little more than an illusion. These companies promised peace of mind, but instead left their members stranded, homeless, and hopeless."

The lawsuits reveal damning details about how AAA and USAA allegedly used flawed estimating software, failed to inspect homes, ignored key building features, and refused to let homeowners purchase additional insurance even when they asked. Both insurers touted their ability to calculate replacement costs "in just minutes," often using only basic information provided over the phone. In reality, the lawsuits allege, these shortcuts and misrepresentations ensured that most customers were drastically underinsured.

In one example of negligence, the complaint states that USAA knew that it was repeatedly and significantly underinsuring policyholders. It underwent a Targeted Market Conduct Examination from the California Department of Insurance. This found that USAA needed to make "millions of additional payments" to its insureds due to "pervasive underinsurance of California residents."

Despite warnings from regulators and previous complaints, these insurance companies failed to fix their coverage estimates, even as the risk of catastrophic wildfire increased and construction costs surged across California. According to the complaints:

• Coverage limits were routinely 50% or more below actual rebuild costs. This was true even for homeowners with "extended replacement" or "home protector" endorsements.
• Insurers blocked or discouraged customers from buying additional coverage, claiming they were already fully protected.
• Victims are now forced to pay hundreds of thousands out-of-pocket before insurers will release any additional funds. This leaves many unable to start rebuilding at all.

"It's a cruel bait-and-switch," Mr. Bentley continued. "USAA and AAA told these homeowners they were covered. Now they're claiming they have to front the money themselves before they'll pay what they owe. Many of these homeowners are completely tapped out financially as they have had to move themselves and their loved ones sometimes thousands of miles, they simply have nothing left."

The lawsuits argue that the underinsurance crisis is not accidental, but a feature of an industry strategy designed to boost market share and minimize claims payouts, all while advertising "full coverage" and financial protection.

"This was not an honest mistake," said attorney Matt Clark of Bentley & More. "This was a business model built to fail homeowners in their greatest moment of need."

The cases are:

Ethan Alexander et al. v. United Services Automobile Association, Los Angeles Superior Court, Case No. 25STCV16247

James R. Fulker et al. v. Interinsurance Exchange of the Automobile Club, Los Angeles Superior Court, Case No. 25STCV16244

About Bentley & More LLP

Bentley & More LLP provides aggressive legal representation to consumers and employees across California. Our attorneys are fierce litigators with decades of experience advocating for our clients. While we are effective in resolving many kinds of conflicts outside of litigation, we have a proven track record of fearlessness in taking matters to trial and beyond.

SOURCE Bentley & More LLP