California seeks millions in penalties from State Farm over alleged claims violations after LA wildfires | California wildfires
California is seeking millions of dollars in penalties from State Farm after an investigation found the insurer was slow to investigate and underpaid claims related to the 2025 Los Angeles-area wildfires, regulators announced Monday.
Ricardo Lara, the state’s insurance commissioner, said State Farm violated the law hundreds of times in a sampling of 220 cases. If State Farm is found to be “willful” in violating state law, the maximum penalty allowed by law would be approximately $4 million. Regulators could also temporarily suspend the company’s license, effectively banning the state’s largest home insurer from writing new policies in California for a year.
The two fires were devastating; It killed 31 people and destroyed more than 16,000 structures.
In a statement, State Farm said it rejected “any suggestion that it engaged in malpractice or common practices of deliberately underpaying for wildfire claims” and that the state’s insurance market was “dysfunctional.” The company said it paid out more than $5.7 billion for 13,700 auto and home insurance claims related to the fires.
“The threat to suspend State Farm General’s ability to serve customers primarily due to administrative and procedural errors is a reckless, politically motivated attack that could ultimately disrupt California’s homeowners insurance market,” the statement said.
The legal action comes as California is grappling with an ongoing insurance crisis in which companies are raising rates, limiting coverage or withdrawing altogether from areas susceptible to wildfires and other natural disasters. In 2023, many major insurance companies, including State Farm, have either paused or restricted new insurance coverage in the state. They said they could not truly price in the risk associated with properties as bushfires became more common and destructive due to the climate crisis.
The government now gives insurers more latitude to raise premiums in exchange for issuing more policies in high-risk areas. This includes regulations that allow insurers to take climate change into account when setting their prices and pass on reinsurance costs to California consumers.
Last year, Lara also approved State Farm’s request to raise homeowners’ premiums by 17% in the wake of the fires in Los Angeles to help the company avoid a financial crisis. State Farm also agreed in March not to rescind any new policies this year in an agreement with the department and a consumer group.
Lara launched the investigation last June after survivors of the Palisades and Eaton fires said State Farm delayed and mishandled claims about damage to their homes and possible smoke pollution.
“Our investigation found that State Farm delayed, undercharged, and buried policyholders in red tape at the worst time of their lives. This is unacceptable, and we are taking decisive action to hold them accountable,” Lara said in a statement.
The department reviewed 220 random claims made to State Farm and found nearly 400 violations. These included underpayment and slow or inadequate claims processing. About one-third of all housing requests filed after the fires were covered by State Farm, state officials said. The state’s insurance department said thousands of people could be affected by the illegal behavior.
In one case, State Farm waited nearly three months before beginning to investigate a claim, according to the state. In another, the company delayed payment to a customer for months and internally acknowledged that the payment needed to be approved. The company also caused confusion with one customer after assigning a dozen experts to the case over four months.
State Farm also illegally denied payments for sanitary testing for toxins in smoke damage claims, legal documents said.
State Farm is the second insurance company to be taken legal action by the state regarding fire claims in Los Angeles. The Ministry is also seeking remedies against the Fair Plan, denying claims of smoke damage. The plan is an insurance pool from which all major private insurance companies pay, and the plan issues policies to people who cannot obtain private insurance because their properties are deemed too risky to be insured.
