California Launches Probe Into State Farm’s Handling Of LA Wildfire Insurance Claims

Authored by Kimberley Hayek via The Epoch Times,

The California Department of Insurance (CDI) has launched an investigation into State Farm General’s handling of claims following the Eaton and Palisades Fires in January, California Insurance Commissioner Ricardo Lara said on June 12.

Lara said that Californians should receive what they are owed from insurance companies without facing delays that can cause consumers to give up on filing a claim.

The California Department of Insurance urged those affected by the Los Angeles wildfires to file formal complaints as part of its investigation. The department said it has received general allegations from wildfire survivor groups regarding State Farm’s handling of claims, but “a formal complaint is needed for the department to take action and advocate for consumers.”

“While there are national standards for insurance claims handling, they can be vague and inconsistently applied, especially during large-scale, climate-driven disasters,” Lara said in a June 12 statement.

“This examination will assess whether State Farm has complied with California’s consumer protection and claims handling laws and will help determine if further reforms are needed as natural disasters increasingly disrupt insurance markets across the country.”

With insurers still in the payout phase, the department plans to be able to assess adjuster practices and assess State Farm’s claims handling process.

“Following the Eaton Fire, our community deserves clear communication and fair treatment to facilitate a swift rebuilding process. I have received numerous complaints from neighbors regarding the claims process. A market conduct examination will provide the clarity we urgently need,” Assemblymember John Harabedian, a Democrat from Pasadena, said in a statement.

A market conduct examination consists of a review that generally takes several months. It is designed to ensure an insurance provider complies with the California Insurance Code (CIC) and the California Code of Regulations (CCR) regarding rating, underwriting, and claim practices.

Lara said his staff will investigate State Farm’s alleged constant reassignment of adjusters, a lack of continuity between company representatives and consumers, differing results on similar claims, poor record-keeping, and information-sharing between claims personnel.

“These issues create unnecessary stress, prolong recovery, and erode trust,“ Lara said.

”The strongest evidence we can present is the voice of consumers themselves. I urge any wildfire survivor facing delayed payments, claim disputes, multiple adjusters, smoke damage issues, or any other problems to file a formal complaint with my Department.”

The department claims it has recouped over $40 million on behalf of those affected by the Eaton and Palisades fires through interventions based on formal complaints. By May 12, insurance companies had paid almost $17 billion to residential and commercial insurance policyholders who made claims in the aftermath of the Eaton and Palisades fires, according to the CDI.

Last month, Lara launched a task force to develop industry standards for insurance coverage and clean-up of smoke-damaged homes.

In this aerial view taken from a helicopter, burned homes are seen from above during the Palisades fire near the Pacific Palisades neighborhood of Los Angeles on Jan. 9, 2025. Josh Edelson/AFP via Getty Images

State Farm said in a June 12 statement that it is working with the Department of Insurance to comply with the market conduct exam process.

“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.”

State Farm said that as of June 12, it had received over 12,870 total claims related to the fires and paid out more than $4.03 billion.

The company asked customers to continue to directly reach out to the company with claim questions or concerns and reiterated its commitment to building an affordable, available, and sustainable insurance market in California.

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

An aerial view of homes burned in the Eaton Fire, with storm clouds hanging over the San Gabriel Mountains, in Altadena, Calif., on Jan. 25, 2025. Mario Tama/Getty Images

Rate Increase

In May, Lara approved State Farm’s request for an interim rate increase. The interim rate approval allowed State Farm General (SFG) to receive from its parent company, State Farm Mutual (SFM), a $400 million advance in the form of surplus notes.

The rate change entailed a 17 percent increase for homeowners starting on or after June 1.

“Today’s emergency interim rate approval by the Commissioner is a critical first step for State Farm General’s (SFG) ability to continue serving our California customers,” the company said in a statement.

The company said it must build sufficient capital for the future while repaying the surplus note balance, plus interest, over time. State Farm is still seeking an additional 13 percent increase, in line with its initial 30 percent.

The rate increase was intended to help stabilize the company’s financial condition related to its California business.

The Epoch Times reached out to the Department of Insurance for comment but did not receive a response by publication time.