The California Department of Insurance has taken legal action against State Farm General Insurance Company following an expedited investigation into the handling of claims from the 2025 Los Angeles wildfires. The Department announced that the investigation found widespread violations that may have affected thousands of wildfire survivors.
Investigation Finds Widespread Violations
The Department launched a Market Conduct Examination after receiving consumer complaints. Investigators reviewed 220 claims and identified 398 violations of state law in 114 of those claims. Many claims included multiple violations, indicating a broader pattern of issues.
State Farm policyholders filed about 11,300 residential claims related to the Los Angeles wildfires. This figure represents nearly one-third of the 38,835 claims filed across all insurers. Based on these findings, the Department stated that the violations could impact thousands of survivors.
Insurance Commissioner Ricardo Lara said the investigation found that State Farm delayed payments, underpaid claims, and created administrative barriers for policyholders.
Key Issues Identified in Claims Handling
The Department outlined several major violations uncovered during the investigation:
- Delayed investigations and payments: State Farm did not begin investigations within 15 days, failed to accept or deny claims within 40 days, and did not issue payments or notices within 30 days as required by law.
- Underpayment of claims: The company issued settlement offers that were considered unreasonably low.
- Frequent reassignment of adjusters: Policyholders experienced repeated changes in adjusters, leading to confusion described as “adjuster roulette.”
- Smoke damage claim issues: Nearly half of all complaints involved smoke damage. Investigators found failures to provide written denials, misclassification of testing costs, and misrepresentation of policy provisions.
- Poor communication: The company failed to respond to policyholders, send required updates, or notify customers when additional time was needed.
Enforcement Action and Financial Penalties
The Department is seeking millions of dollars in penalties, which it described as the largest amount pursued after a wildfire disaster this century. In addition, State Farm must take corrective actions to speed up payments and resolve outstanding claims.
The Department filed an Accusation and Order to Show Cause, which initiates a public hearing before an administrative law judge. The filing includes the 398 violations identified in the examination and 34 additional violations based on consumer complaints.
Under California Insurance Code Section 790.035, penalties may reach $5,000 per violation or $10,000 for willful violations.
Broader Recovery Efforts
The Department reported that it 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, 2026, insurers have paid more than $23.7 billion to residential, commercial, and auto policyholders affected by the fires.
Legislative Action to Address Future Disasters
Alongside legal action, the Department is supporting new legislation to improve claims handling after disasters. Two bills are currently under consideration:
- The Disaster Recovery Reform Act (SB 876): This bill would require insurers to maintain disaster recovery plans, double penalties during declared emergencies, mandate restitution to policyholders, and address delays caused by repeated adjuster reassignments.
- The Smoke Damage Recovery Act (AB 1795): This measure would establish enforceable standards for assessing and restoring smoke-damaged homes, including science-based testing requirements.
Both bills advanced through legislative hearings in April and are now under review by the Senate and Assembly Appropriations Committees.
Additional Developments and Consumer Guidance
Wildfire survivors experiencing claim delays, disputes, or smoke damage issues can file formal complaints with the California Department of Insurance through its website or by phone.
Separately, the Department, Consumer Watchdog, and State Farm General reached a three-party settlement agreement regarding State Farm’s emergency rate request. That agreement is currently under review by an administrative law judge.
Consumer Watchdog may also request intervenor compensation for its role in the rate review process. If approved, the amount will be determined through a separate review and paid by State Farm policyholders.
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