Auto insurance rates are rising sharply in California, and critics are pointing fingers at the state's legal system as a major contributor to the increase.
In 2024, California's auto insurance premiums are projected to increase by more than 50%, with the average cost for full coverage expected to reach $2,681—up from $1,666 in 2023.
For many residents, like Lucille Holt, the rising premiums are more than just an inconvenience—they’re a financial burden.
“My house and car insurance was dropped without notice,” Holt wrote on X. “No recourse. I was able to get car insurance at a substantial increase: I have no tickets ever, no accidents [that were] my fault, nothing.”
For people like Holt, skyrocketing insurance premiums are making it harder to stay in the state they’ve called home for decades.
As premiums continue to rise, many believe reforming California’s legal system—specifically to address tort abuse and third-party litigation funding—is essential to easing the financial strain on consumers. But until reform takes place, residents like Holt will continue to face escalating costs of living in the Golden State.
Critics, including former Congressman Bob Goodlatte, argue that the state’s legal system is a significant factor in the rising costs, affecting industries beyond auto insurance.
Goodlatte, who served in the U.S. House of Representatives for over two decades, published a letter in the Orange County Register calling out what he sees as rampant lawsuit abuse in California.
“California taxpayers are unwittingly paying more than $1,900 annually in ‘tort taxes,’ a measure of the society-wide cost of lawsuit abuse on unrealized economic activity. Working families should be outraged,” Goodlatte wrote. “Instead of funding better schools or stronger public safety, the Golden State’s economy is forfeiting tens of millions each year to finance luxury boats and third homes for rapacious trial attorneys.”
Goodlatte’s comments highlight growing concerns about class action lawsuits and third-party litigation funding (TPLF) inflating costs for consumers. TPLF allows outside investors to fund lawsuits in exchange for a cut of the proceeds, a practice critics say benefits investors and attorneys more than plaintiffs.
“The people who are funding these lawsuits—often hedge funds and foreign investors—are using our courts to make a profit, and it’s Californians who are paying the price,” Goodlatte added. “We’re seeing higher auto insurance premiums because companies are being forced to spend millions defending themselves against frivolous lawsuits. The cost of that defense is passed directly onto the consumer.”
California has taken steps to regulate third-party litigation funding through Senate Bill 581, which includes interest rate caps and consumer protections. However, critics argue the measures don’t go far enough to address issues of transparency and accountability in the legal system.
“The state has made an attempt to regulate the industry, but they’ve left a lot of gaps,” Holt said. “We’re talking about an entire ecosystem built around creating more litigation. It’s not helping consumers—it’s making everything more expensive, including insurance.”
Concerns over the influence of trial attorneys and external investors have led to calls for broader reform. In 2024, U.S. Rep. Darrell Issa (R-Calif.) introduced the Litigation Transparency Act, aimed at increasing disclosure of third-party funding in lawsuits. Issa’s bill focuses on the growing influence of foreign-backed investors in litigation, particularly in high-stakes intellectual property cases.