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.
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.
