The California Department of Insurance announced legal action Monday against State Farm General Insurance Co. following an investigation that found significant mishandling of claims filed by survivors of the 2025 wildfires in Los Angeles County.
Insurance Commissioner Ricardo Lara ordered a Market Conduct Examination that allegedly uncovered a pattern of unlawful behavior in more than half of the claims reviewed, officials said. State Farm policyholders filed roughly 11,300 residential claims related to the wildfires that devastated tens of thousands of acres, destroyed or damaged more than 16,000 properties and killed 31 people in Altadena and Pacific Palisades.
State Farm claims total one-third of the 38,835 claims filed across all insurers, indicating that thousands of fire survivors likely have been affected, according to the Department.
“Wildfire survivors came to us for help, and we followed the facts,” Lara said 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.”
According to the Insurance Department, the enforcement action “seeks millions of dollars in penalties, considered the largest amount pursued this century following a wildfire disaster.”
The New York Times reported the fines sought total a “historic” $2 million, drawing criticism from fire survivor advocates.
“State Farm earns an estimated $2.2 million every hour on its $240 billion investment empire. Commissioner Lara calls a $2 million fine historic,” Joy Chen, executive director of the Every Fire Survivor’s network, said in a statement.
“They have the money to fulfill their obligations to LA fire survivors,” Chen said. “They have just chosen not to because weak regulation has made it more profitable to delay and deny than to pay.
“In fact, Lara’s own examination found 398 violations in 114 of 220 claims reviewed: delays, underpayments, and rotating adjusters while State Farm’s investment empire compounded,” according to Chen.
“The lack of enforcement of our regulations is not just a State Farm problem,” Chen added. “Department of Angels research shows 70% of insured Eaton and Palisades survivors report delays, denials, and underpayments across all insurers. Thousands of families are suffering as a result.”
In addition to penalties, the insurance regulators are requiring State Farm to take corrective actions to speed up payments and resolve outstanding claims.
“The Los Angeles fires were one of the most destructive disasters in our state’s history,” Lara said. “Survivors deserve a fair, timely recovery, not obstacles and delays. We are taking a two-pronged approach: legal action to address State Farm’s conduct, and legislative action to ensure this does not happen again.”
Company officials “strongly disagree” with the Lara’s assertions and the investigation’s findings, which are “a distorted picture of State Farm’s response,” said a statement from the insurer on Monday.
“California’s homeowners insurance market is the most dysfunctional in the country, and State Farm has worked to be part of real solutions,” according to the company. “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 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.”
According to the governor’s office, rates in California for homeowner insurance are below the national average and considerably lower than what homeowners pay elsewhere.
“For a standard policy with $300,000 in dwelling coverage, Florida is now the most expensive state in the country at $7,136 — 181% above the national average and 4.4 times California’s rate — after regulator-approved Florida home insurance rates rose 49.5% from 2020 through 2025,” California officials reported. “Louisiana ranks second at $5,986 after a 58% increase from 2023 to 2025, while Texas averages $4,085 and the median Texas homeowner paid 60% more in 2024 than in 2019.”
State Farm also rejected the allegation that the insurer “engaged in a general practice of mishandling or intentionally underpaying wildfire claims. … The additional payments tied to the issues identified in the Market Conduct Examination were about $40,000 in the context of more than $5.7 billion paid.”
State Farm policies cover more than 1 million homes in California and insure more residences in fire-affected areas than any other insurance company.
“We handled more than 13,700 auto and homeowners claims, paid more than $5.7 billion to help customers recover, and nearly 200 claims professionals remain on the ground today helping customers rebuild,” State Farm reported.
“Using a thin sample of claims to justify sweeping allegations turns regulatory oversight into a political weapon, creating headlines instead of delivering facts and real consumer protection,” company representatives said. “It was based on a sample of 220 files, and most of the issues cited were administrative or process-related — such as notices or letters sent after statutory requirements, documentation or payee information — not broad failures to pay covered claims.”
Pattern of delay and denial
Officials said major violations mirror the delays and denials reported by wildfire survivors related to the 220-claim review that found 398 violations of state law in 114 of the claims, many of which contained multiple infractions. The Insurance Department provided this list:
- “Slow and inadequate investigation: State Farm failed to begin investigating claims within 15 days, failed to accept or deny claims within 40 days, and failed to pay accepted claims or provide written notice of the need for additional time within 30 days, as required by law.
- “Underpayment of claims: State Farm made unreasonably low settlement offers and underpaid claims.
- “Multiple adjusters causing confusion: State Farm failed to assign adjusters within statutory timelines and reassigned adjusters repeatedly, creating what survivors described as “adjuster roulette.”
- “Smoke damage claim denials and delays: Smoke damage claims represented nearly half of all consumer complaints. Examiners found that State Farm failed to provide required written denials for hygienist and environmental testing, misclassified testing costs, and misrepresented policy provisions related to inspections.
- “Inadequate communication: State Farm failed to respond to policyholders, send required status letters, or provide notice when additional time was needed to determine claims.
Since January, the Department has recovered more than $280 million from all insurance companies for survivors of the Eaton and Palisades fires through direct intervention. As of March 3, insurers have paid out more than $23.7 billion to residential, commercial and auto policyholders impacted by the fires.
Legal action
The first step of the Insurance Department’s legal move is a public hearing before an administrative law judge on alleged violations of the Unfair Insurance Claims Practices Act and other regulations, including the 398 violations identified in the investigation and 34 more violations based on consumer complaints.
Penalties could reach $5,000 per violation, or $10,000 for willful violations, officials said.
State Farm defended its response to the wildfires.
“Claims professionals, agents, and support teams have worked long hours — often away from their own families — to inspect losses, answer questions, issue payments, support temporary living arrangements and help customers navigate one of the most severe wildfire events in California history,” according to the company’s statement. “We recognize that in an event of this scale, a perfect process is nearly impossible and some customers understandably and unfortunately experienced some frustration. Real progress has been made toward helping people recover and we remain committed to addressing remaining customer concerns.”
Gov. Gavin Newsom said access to funds from insurance payouts “is foundational” to the region’s wildfire recovery efforts.
“People need accelerated relief, and we’re not going to sit by while companies slow-walk claims and make it harder for families to rebuild,” Newsom said in a statement. “We’re standing up for survivors by holding insurance companies accountable — especially when they delay or deny what people are owed.”
Lara is sponsoring legislation that aims to strengthen disaster-related consumer protections:
The Disaster Recovery Reform Act, Senate Bill 876, requires insurers to maintain disaster recovery plans, doubles penalties during declared emergencies, mandates restitution to policyholders and addresses delays caused by multiple adjuster reassignments.
The Smoke Damage Recovery Act, Assembly Bill 1795, establishes California’s first enforceable public health and insurance standards for smoke-damaged homes, including science-based testing and restoration requirements.
Officials said wildfire survivors experiencing delays, disputes, smoke damage problems or other claim issues should file a formal complaint at insurance.ca.gov or by calling 800-927-4357.
In March, the Department of Insurance, Consumer Watchdog and State Farm reached a three-party settlement agreement over the insurer’s emergency rate-hike request that includes a 17% increase in the cost of homeowner policies. A judge is reviewing that agreement.
“At a later date, Consumer Watchdog may submit a request for intervenor compensation for its participation in the rate review and settlement process, as authorized under Prop. 103,” according to the Department. ”If approved, the compensation amount — to be paid by State Farm policyholders — will be determined through a separate review process.”
More about the intervenor compensation process is on the Department’s website.
Updated May 5, 2026, 12:55 p.m.
