Regulators want to suspend State Farm’s license, citing mishandling of LA Wildfire claims
California regulators want to suspend State Farm’s license for a year and levy millions in fines on the insurer, alleging it mishandled claims for the January 2025 wildfires in Los Angeles County.
The Department of Insurance announced Monday that it has filed a lawsuit against the state’s largest home insurer after an investigation of 220 sample claims found 398 state law violations in nearly half of them.
“Our investigation found that State Farm delayed, underpaid, and buried policyholders at the worst time of their lives,” Insurance Commissioner Ricardo Lara said in a statement. “That is unacceptable, and we are taking drastic measures to hold them accountable.”
The department has filed a cease-and-desist order barring the insurer from engaging in unfair or deceptive practices — and suspending State Farm’s “certificate of authority” for a year, meaning it can’t write policies during that time, said department spokesman Michael Soller.
Regulators want State Farm policyholders to be made whole, even though the Department has no legal authority to order land restitution, he said.
State Farm has processed about 11,300 housing applications, or about one-third of those filed after the Jan. 7 fires destroyed or damaged more than 16,000 homes and killed 31 people.
The department in June 2025 launched a “market conduct test” on State Farm General – a company owned by a large insurance company from Bloomington, Ill. California home insurance carrier – after complaints from fire victims in Pacific Palisades, Altadena and nearby communities.
Test results were released Monday in support of the legal action.
It found that the company failed in many cases to pursue “thorough, fair and objective investigations” into claims, failed to reach “prompt, fair, and equitable settlements” and made “unreasonably low” offers.
Other alleged violations include failing to provide timely responses to claims, providing a factual or legal basis for denying claims and or providing victims with a point of contact after providing three or more adjusters within a six-month period.
The official filing also details the company’s handling of smoke damage claims, including denial of payment for toxicology tests.
An examination of market behavior includes State Farm’s responses to each of the 398 violations. The company has denied wrongdoing in some cases and admitted wrongdoing in others, often attributed to problems with specific processors.
The company also noted that it held meetings with regulators after learning of the alleged breach.
Alleged violations carry fines of up to $5,000 and up to $10,000 if they are found to be willful. The case will be heard by an administrative law judge, who will make recommendations to Lara about a possible sentence.
The department said alleged violations could bring fines of $2 million or more, the largest penalty this century for the mishandling of wildfire claims, Soller said.
State Farm, which says it has paid more than $5.7 billion to settle victims, issued a statement on April 22 outlining five “obligations” for policyholders.
They included providing a single point of contact and improved communication for “fewer hands, fewer repeated explanations, and seamless support.”
Complaints about State Farm’s claims have surfaced in the months since the Jan. 7 wildfires, particularly regarding smoke-damaged homes, with victims saying the insurer was reluctant to pay for sanitation tests to detect toxins.
The victims of the fire called for the insurance to be strengthened and the tax increase that State Farm was seeking to be stopped until their grievances are resolved.
They also asked Lara to resign, saying that she did not follow the law, when she opposed the conduct test in the market to study.
Some fire victims also complained that state regulators ignored their complaints about State Farm.
Los Angeles County also has an ongoing investigation into the insurance.
