Lawmakers in three US states are pushing a new front in climate and insurance litigation, seeking to allow state attorneys general – and in some cases insurers – to sue fossil fuel companies over surging home insurance costs linked to climate change.
In California, Hawaii and New York, proposed legislation would authorize attorneys general to bring actions against major fossil fuel producers, arguing that climate‑driven extreme weather has contributed to spiraling property insurance premiums and gaps in cover. Only fossil fuel firms worth at least US$500 million and doing business within each state’s borders would be in scope.
Targeting FAIR Plans and premium relief
According to a report from The Guardian, damages recovered could be used to offset residents’ rising home insurance bills and support state Fair Access to Insurance Requirements (FAIR) plans – residual market schemes funded by private insurers that step in when households cannot find cover in the open market.
In California, funds could also be used to fireproof low‑ and middle‑income homes, while the Hawaii and New York bills go further by granting insurers a new legal right to sue fossil fuel companies directly after a climate disaster.
Escalating stress in property insurance markets
The proposals come amid intensifying insurance stress. In California, the deadly January 2025 Los Angeles‑area wildfires destroyed more than 18,000 homes and properties, triggering steep premium hikes, widespread non‑renewals and thousands of delayed or denied claims. Reliance on the FAIR Plan has increased 500% in less than a decade as major carriers have withdrawn capacity. The plan expects to pay $4 billion in losses from the 2025 LA fires and has called on participating insurers for US$1 billion in funding, with roughly half likely to be recouped through further rate rises.
Hawaii has faced a similar squeeze following floods, hurricanes and fires, including the 2023 Maui blazes, which led to more than $2.3 billion in claims. Premiums have risen by as much as 50% year over year, with even sharper increases for condominium dwellers, while some insurers have dropped policyholders and exited the state.
In New York, home insurance premiums have increased 19% statewide since 2018, with some segments hit much harder; insurance costs for multifamily homes in Brooklyn more than doubled between 2020 and 2023, according to Yardi Matrix, according to the report.
What’s at stake for carriers and reinsurers
Supporters argue that residents and small businesses are being left to absorb climate‑fueled catastrophe costs while major emitters have not been made to share the burden. Survivors’ networks and lawmakers in California say the FAIR Plan is becoming increasingly stretched as it absorbs risks shed by the private market, raising questions about its long‑term capacity.
For carriers, the bills raise practical questions about how any recoveries would flow through to balance sheets. In theory, payments from fossil fuel companies could help offset catastrophe losses borne by insurers and FAIR Plans, easing capital strain and tempering some future rate hikes. In practice, recoveries would likely be sporadic, heavily contested and slow to materialize – upside that cannot be built into pricing or capital planning.
Reinsurers and coverage counsel are also watching closely. The report said a key issue is how any successful claims against fossil fuel producers would be characterized and how they would be shared between primary carriers and reinsurers. Treaty wording, aggregation and allocation of litigation proceeds could all come under scrutiny if state‑backed or insurer‑led actions begin to generate meaningful payouts.
Part of a broader climate liability wave
The state‑level push is part of a wider wave of climate‑related liability efforts. Dozens of US states and local governments have filed lawsuits alleging that major oil companies misled the public about the climate crisis. Vermont and New York have passed “climate superfund” laws requiring large fossil fuel producers to help pay for adaptation, with similar measures proposed in California, New Jersey and other states.
For insurance professionals, the California, Hawaii and New York bills are notable because they explicitly link property insurance affordability and availability to potential upstream recoveries from fossil fuel producers, and in Hawaii and New York would create a new cause of action for insurers themselves.
If enacted, they could open a fresh route for carriers and FAIR Plans to seek contribution toward climate‑related losses but, at least for now, are best seen as a potential supplemental recovery mechanism rather than a substitute for sound pricing, risk selection and investment in resilience.
