California Launches Investigation Into State Farm’s Claims For La Wildfires

California Insurance Commissioner Ricardo Lara announced Thursday that the state Department of Insurance is launching a formal investigation into State Farm’s handling of wildfire claims in Los Angeles County.

The department has initiated a “market conduct examination” of State Farm General Insurance Co., the state’s largest home insurer, expanding an ongoing probe into consumer complaints from policyholders affected by the Palisades and Eaton fires, which killed at least 29 people and razed more than 16,000 structures after burning through more than 37,000 acres.

These examinations typically take several months, Lara and DOI officials said Thursday, and may prompt broader legislative reforms if systemic issues are found.

“Californians deserve fair and comprehensive treatment from their insurance companies,” Lara said in a statement. “No one should be left in uncertainty, forced to fight for what they are owed, or face endless delays that often lead consumers to give up.”

The examination is one of the department’s most comprehensive enforcement tools, officials said, enabling a detailed review of how the insurer handled claims from the January blazes and whether it complied with state consumer protection laws.

Lara said the inquiry comes amid rising concerns about how claims are being processed and whether claimants are receiving consistent and timely responses from state arm of the Bloomington, Indiana-based insurance giant.

“Some troubling patterns that my staff will investigate include the frequent reassignment of multiple adjusters with little continuity in communication, inconsistent management of similar claims, and inadequate record-keeping or information-sharing among claims teams,” he said.

In response to the smoke claims, Lara last month launched a task force of health experts, remediation specialists and consumer advocates to create “fair, science-based, and consistent standards for smoke remediation.”

“Californians deserve to return to homes that are truly safe, not forced to handle smoke, soot, and ash on their own,” Lara said.

The investigation comes just weeks after Lara approved an emergency 17% rate hike for State Farm’s homeowners policies, a move aimed at stabilizing the company’s finances following its wildfire losses. The decision followed a three-day hearing in May, during which an administrative law judge concluded that State Farm was facing “extraordinary financial distress.”

The rate hike, which took effect June 1, includes an agreement that State Farm would not initiate any new mass non-renewals through 2025 and will receive $400 million in financial support from its parent, State Farm Group.

Lara said the decision was necessary to protect the viability of State Farm’s operations in California and prevent further disruption to the state’s insurance market. “Let me be clear: We are in a statewide insurance crisis affecting millions of Californians,” Lara said Tuesday. “Taking this on requires tough decisions.”

Consumer advocates opposed the increase, arguing that it unfairly burdens fire survivors who are already struggling to recover. Administrative Law Judge Karl-Fredric Seligman acknowledged the financial strain on policyholders but said the rate hike was a necessary measure under the circumstances.

Separately, State Farm General was recently named in a lawsuit that accuses the company and other insurers of attempting to steer homeowners into the California FAIR Plan, a state-created insurance pool for high-risk properties, according to the Los Angeles Times. The suit alleges the insurers coordinated to limit their own claims exposure by directing customers toward the FAIR Plan, which typically offers less comprehensive coverage at higher costs than standard policies.

Assemblymember John Harabedian, D-Pasadena, who represents areas burned by the Eaton Fire, praised the decision in a DOI statement.

“Our community deserves clear communication and fair treatment to facilitate a swift rebuilding process,” Harabedian said. “I am grateful to Commissioner Lara for taking action to demand transparency and ensure that families receive the answers they deserve.”

In a statement, State Farm said it is cooperating with the department and will comply with the examination.

“A fair review will find that thousands of State Farm customers are being helped by our teams on the ground in Los Angeles County and are very satisfied,” the company said. “Our efforts will remain on serving all our customers and meeting our obligations under the contract while providing the necessary information to the CDI.”

The company said it had received over 12,855 total claims related to the fires and paid out more than $3.96 billion to California customers as of Tuesday.

“We’re here to help our customers recover and we empathize with those who are rebuilding their lives,” the statement said. “Our focus continues to be on supporting our customers in their recovery from the largest fire event we have ever experienced.”

The company has acknowledged that losses could exceed $7 billion, the bulk of which would be covered by reinsurance.

Lara urged affected policyholders to submit formal complaints to strengthen the department’s case and assist in consumer recovery efforts. Since January, the department has recovered more than $40 million for survivors of the fires through its intervention in consumer complaints, the agency said.

So far, insurance companies have paid out nearly $17 billion to residential and commercial policyholders affected by the January fires, the department said. State Farm, which has 2.9 million home and commercial policies in the state, has received more claims than any other carrier.

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