California's top insurance regulator is seeking millions of dollars in penalties from State Farm after an investigation found the company violated state laws while handling claims from the 2025 Los Angeles-area wildfires. Insurance Commissioner Ricardo Lara announced Monday that the state's largest home insurer violated the law hundreds of times by delaying claim investigations, providing unreasonable payouts, and failing to communicate with policyholders.
The investigation began last June following reports from survivors of the Palisades and Eaton fires, which resulted in 31 deaths and the destruction of more than 16,000 structures. A review of 220 random claims revealed nearly 400 violations, including underpayment and slow processing. State Farm handled more than 11,000 claims from these wildfires, accounting for roughly a third of all claims filed. While the company stated in April that it has already paid customers more than $5.7 billion, regulators say thousands of people may have been affected by unlawful behaviors.
Specific violations included one instance where State Farm waited nearly three months to begin an investigation and another where the company delayed payment despite internally acknowledging it should have been approved. In one case, a customer was assigned a dozen different claim adjusters within four months. The company also illegally denied payments for hygienic testing for toxins in smoke damage claims. If found to be willful in these violations, the maximum penalty allowed by law would be around $4 million. Regulators are also seeking to prohibit State Farm from writing new policies for a year.
State Farm has denied that it mishandled or underpaid claims. The company is the second entity to face legal action from the state over the Los Angeles fire claims, as the department is also seeking remedies against the FAIR Plan for denying smoke damage claims.