California’s top insurance regulator says the state is seeking $ mn in penalties from State Farm after an investigation found the insurer violated claims-handling laws tied to the 2025 Los Angeles-area wildfires.
Insurance Commissioner Ricardo Lara said that State Farm broke state law hundreds of times while handling claims from homeowners affected by the Palisades and Eaton fires.
The investigation started last June after survivors said California’s largest home insurer delayed claims and mishandled damage linked to burned homes and possible smoke contamination.
The two fires caused severe losses across the Los Angeles area. They killed 31 people and destroyed more than 16,000 structures, leaving thousands of residents stuck in repair, rebuilding, and insurance disputes.
Lara said investigators found State Farm delayed payments, underpaid policyholders, and buried claimants in paperwork during one of the worst periods of their lives.
He called the conduct unacceptable and said the state would hold the company accountable.
The Department of Insurance reviewed 220 randomly selected State Farm claims and found nearly 400 violations.
Those violations included underpayment, slow claim handling, and inadequate processing. State Farm received more than 11,000 claims from the Los Angeles wildfires, about one-third of all claims filed, according to state officials.
The department said thousands of policyholders might have been affected by the unlawful conduct.
According to Beinsure, that finding raises the pressure on State Farm because a sample-based review often points regulators toward wider claims-handling problems across a larger book.
An administrative judge will recommend the final penalty amount. Lara will make the final decision.
State Farm is now the second insurer facing California legal action over Los Angeles wildfire claims. The Department of Insurance is also seeking remedies against the FAIR Plan over denied smoke damage claims.
The FAIR Plan operates as an insurer of last resort for homeowners who cannot obtain private coverage because carriers view their properties as too risky. Major private insurers fund the pool, which then issues policies to those higher-risk properties.
The case adds another strain to California’s property insurance market, where wildfire exposure, rising reconstruction costs, and reduced private-market capacity have already pushed more homeowners toward the FAIR Plan.
For policyholders, the dispute isn’t only about penalties. It’s about whether claims get paid fully, and fast enough to rebuild.
