California seeks up to $4 million from State Farm over alleged mishandling of wildfire claims

The state Department of Insurance is seeking as much as $4 million in penalties from insurance giant State Farm due to its alleged mishandling of claims filed by survivors of the January 2025 wildfires that swept through the Los Angeles area.

The regulators, who launched their investigation into State Farm last summer, also are considering a temporary suspension of State Farm’s license to underwrite new policies for a year.

The investigation’s findings point to slow and inadequate investigations, underpayments of claims, multiple adjusters causing confusion and smoke damage claims receiving denials and delays. Of the sample 220 claims, 114 claims held 398 state law violations for which penalties range $5,000 to $10,000 each.

“Wildfire survivors came to us for help, and we followed the facts,” said Commissioner Ricardo Lara in a statement. “Our investigation found that State Farm delayed, underpaid, and buried policyholders in red tape at the worst moment of their lives. That is unacceptable, and we are taking decisive action to hold them accountable.”

State Farm denied the investigation’s findings of wrongdoing, noting the problems lie with the state’s insurance climate.

“The threat to suspend State Farm General’s ability to serve customers over primarily administrative and procedural errors is a reckless, politically motivated attack that could ultimately cripple California’s homeowners insurance market,” State Farm wrote in a statement. “California’s homeowners insurance market is the most dysfunctional in the country, and State Farm has worked to be part of real solutions.”

See more: State Farm rate hike stands at 17% for California homeowners after settlement with state

In its announcement Monday, the DOI said that it forwarded its findings in the investigaton to an administrative law judge, who could decide whether to suspend the company’s certificate of authority to underwrite policies in California.

The major enforcement action follows numerous complaints from residents about delays lasting over a year, replacement payments that didn’t cover the costs of rebuilding a new home, and denials of legitimate wildfire claims from the Pacific Palisades and Altadena wildfires last January 2025 that tore through more than 16,000 structures and killed 31 people.

Other complaints from wildfire claimants have pointed to an “adjuster roulette,” a term that has come to describe the regular pattern of insurance agents assigning one adjuster after another without ever settling wildfire claims.

Joy Chen, executive director of Every Fire Survivor’s Network, said the insurance provider’s response is part of a broader trend.

“The lack of enforcement of our regulations is not just a State Farm problem,” said Chen in a statement. “The Department of Angels research shows 70% of insured Eaton (Altadena) and Palisades survivors report delays, denials, and underpayments across all insurers. Thousands of families are suffering as a result.”

See more: LA County launches investigation of State Farm over handling of wildfire claims

The Department of Angels is a local advocacy organization that was created to provide communities impacted by the Altadena and Palisades wildfires with the staffing and resources they need to help in their recovery.

Some 41,800 claims in response to the wildfires have been filed across all insurers, according to the Department of Insurance’s official claims tracker.

Just two months ago, a settlement between the DOI  and Consumer Watchdog approved the company’s 2025 emergency rate hike of 17% for homeowners.

Consumer Watchdog, an advocacy group, argued the insurance department had placed the cart before the horse by not holding a hearing when Lara approved the interim rate hike for the state’s largest insurer.

The legal action is coupled with Lara’s sponsorship of two pieces of legislation.

The Disaster Recovery Reform Act, filed by state Sen. Steve Padilla would require insurers to maintain disaster recovery plans, double penalties for violations during declared emergencies, mandate restitution to policyholders, and address delays caused by multiple adjuster reassignments.

The Smoke Damage Recovery Act filed by Assemblymember Mike Gipson would establish California’s first enforceable public health and insurance standards for smoke-damaged homes, including science-based testing and restoration requirements.Related Articles

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