The California Department of Insurance is taking action against State Farm over an investigation that reportedly shows the carrier has been mishandling insurance claims from the January 2025 Los Angeles wildfires.
A CDI filing alleges violations of the Unfair Insurance Claims Practices Act, including 398 violations identified in a market conduct examination.
The CDI and California Insurance Commissioner Ricardo Lara ordered the market conduct examination based on consumer complaints that they say documented a pattern of unlawful behavior in more than half of the claims reviewed.
Related: Public Interest Groups Backing California Homeowners Insurance Bills
According to the CDI, State Farm policyholders filed roughly 11,300 residential claims related to the L.A. wildfires, accounting for nearly one-third of all claims filed across all insurers.
Lara and the CDI say their investigation found that State Farm delayed, underpaid, and “buried policyholders in red tape.” The CDI reportedly reviewed a sample of 220 claims and found 398 violations of state law in 114 of the claims.
State Farm recently issued a statement affirming the company’s commitment to California recovery, including assigning single points of contact and regularly communicating with customers. The company also said it has assigned an executive to handle customer relations for California. The statement notes that State Farm handled more than 11,300 claims and has paid out more than $5.7 billion.
State Farm when reached out to for a response provided a comment via email: “Wildfire survivors deserve real solutions – not a distorted picture of State Farm’s response. We strongly disagree with the Department’s characterization. We reject any suggestion State Farm engaged in a general practice of mishandling or intentionally underpaying wildfire claims, and we will respond through the process.”
The comment calls out the state’s homeowners insurance market as “the most dysfunctional in the country.”
“The state is facing an availability and affordability crisis, and the California Department of Insurance should take responsibility for regulatory delays and uncertainty that have contributed to fewer choices and higher costs for consumers. The Department’s approach is adding uncertainty to a market that already lacks predictability, discouraging participation and leaving Californians with fewer coverage options when they need them most,” the statement continues.
According to the investigation: State Farm failed to begin investigating claims within 15 days and failed to accept or deny claims within 40 days; made unreasonably low settlement offers and underpaid claims; failed to assign adjusters within statutory timelines; and failed to provide written denials for hygienist and environmental testing.
Smoke damage claims have emerged as a point of contention between some carriers and consumers. Following the L.A. fires, Lara created the Smoke Claims and Remediation Task Force, which found wildfire victims were falling through the gaps in smoke damage inspection, testing and restoration rules. A bill to create a statewide framework for handling wildfire smoke damage claims is now making its way through California Legislature.
The CDI action seeks millions of dollars in penalties, and is requiring State Farm to take corrective actions to speed up payments and resolve outstanding claims.
Related: Travelers to Expand Homeowners Insurance Offering in California
Under California Insurance Code Section 790.035, penalties may reach $5,000 per violation, or $10,000 for willful violations.
State Farm, California’s largest homeowners insurer, got approval for a 17% rate increase following billions of dollars in losses from the L.A. wildfires and a pullback on writing new policies in the state. State Farm had upped its rate request in May.
As of March 3, insurers have paid out more than $23.7 billion to residential, commercial, and auto policyholders impacted by the L.A. wildfires, according to the CDI.
The fires are seen as a low in an ongoing homeowners insurance crisis in California. Several carriers pulled back or halted writing new policies in the state, and regulators responded with measures including enabling quicker rate request reviews, allowing forward-looking catastrophe modeling and other steps. As a result, some carriers have returned to writing new homeowners policies.
The Travelers Companies last week said it intends to expand its homeowners insurance offerings across California. In January, two carriers announced they were working to expand coverage in wildfire-prone regions of the state in exchange for rate hikes. CSAA Mercury Insurance raised rates 6.9%, a move that was approved under the Sustainable Insurance Strategy. Farmers Insurance in late November announced it would eliminate a cap on the number of homeowners insurance policies it offers in California.
Fourteen of 20 most destructive wildfires in California have occurred in the last 10 years. The January 2025 Los Angeles wildfires, which included the Eaton and Palisades fires (the second and third worst in state history) cost several large carriers in excess of $1 billion, are seen as a tipping point for the state’s insurance crisis. In response to the L.A. wildfires, several regulatory changes have been enacted and numerous pieces of state legislation were passed or are making their way through Legislature.
Top photo: 2025 Eaton Fire. Photo by CalFire.
Topics Catastrophe California Natural Disasters Claims Wildfire Louisiana
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