California says State Farm violated the law in handling of insurance claims after 2025 LA wildfires

SACRAMENTO, Calif. (AP) — California’s top insurance regulator says the state is seeking millions of dollars in penalties from State Farm after an investigation found the insurance company violated state laws while handling claims from the 2025 Los Angeles-area wildfires.

State Farm violated the law hundreds of times for delaying claim investigations, providing unreasonable payouts and failing to communicate with policyholders, Insurance Commissioner Ricardo Lara said Monday.

Regulators are also seeking to prohibit State Farm, the state’s largest home insurer, from writing new policy for a year.

Lara launched the investigation last June after survivors of the Palisades and Eaton fires said that State Farm was delaying and mishandling claims regarding damage to their homes and possible contamination from smoke.

“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,” Lara said in a statement.

State Farm didn’t immediately respond to request for comment.

The two fires were devastating — they led to the deaths of 31 people and destroyed more than 16,000 structures.

The department looked at 220 random claims filed to State Farm and found nearly 400 violations. They included underpayment and slow or inadequate claim processing. State Farm received more than 11,000 claims from the Los Angeles wildfires, accounting for roughly a third of all claims filed, state officials said. The company said in April it’s already paid customers more than $5.7 billion. The department said thousands of people might be affected by the unlawful behaviors.

In one case, State Farm waited nearly three months before starting to investigate a claim, according to the state. In another, the company delayed paying a customer for months while internally acknowledging the payment should have been approved. The company also caused confusion for a customer after assigning a dozen claim adjusters to the case within four months.

State Farm also illegally denied payments for hygienic testing for toxins in smoke damage claims, the legal filings said.

The final amount of penalties will be recommended by an administrative judge and finalized by Lara. The maximum amount allowed by law would be around $4 million if State Farm is found to be “willful” in violating state law.

State Farm is the second insurance company to face legal actions from the state over its handling of LA fire claims. The department is also seeking remedies against the FAIR Plan for denying smoke damage claims. The plan is an insurance pool that all the major private insurers pay into, and the plan then issues policies to people who can’t get private insurance because their properties are deemed too risky to insure.