California takes legal action against State Farm after investigation finds widespread mishandling of LA wildfire claims

News: 2026 Press ReleaseFor Release: May 4, 2026Media Calls Only: 916-492-3566Email Inquiries: cdipress@insurance.ca.gov SACRAMENTO, Calif.— The California Department of Insurance today announced a major enforcement action against State Farm General Insurance Company after an expedited investigation uncovered significant mishandling of insurance claims filed by survivors of the 2025 Los Angeles wildfires. Acting on consumer complaints, Insurance Commissioner Ricardo Lara ordered a Market Conduct Examination that documented a pattern of unlawful behavior in more than half of the claims reviewed. State Farm policyholders filed approximately11,300 residential claimsrelated to the Los Angeles wildfires, nearly one-third of the38,835claims filed across all insurers, according to the Department’s official claims tracker. The violations identified by the Department indicate thatthousands of survivors may have been affected. “Wildfire survivors came to us for help, and we followed the facts,” said Commissioner Lara. “Our investigation found that State Farm delayed, underpaid, and buried policyholders in red tape at the worst moment of their lives. That is unacceptable, and we are taking decisive action to hold them accountable.” The Department’s enforcement action seeksmillions of dollars in penalties, considered the largest amount pursued this century following a wildfire disaster. In addition to penalties, the Department is requiring State Farm to take corrective actions to speed up payments and resolve outstanding claims “The Los Angeles fires were one of the most destructive disasters in our state’s history. Survivors deserve a fair, timely recovery, not obstacles and delays,” Commissioner Lara said. “We are taking a two-pronged approach: legal action to address State Farm’s conduct, and legislative action to ensure this does not happen again.” The investigation also highlights the urgency of Commissioner Lara’s sponsored legislation pending in Sacramento that would improve claims handling after a disaster, namely theDisaster Recovery Reform Act (SB 876, Padilla)and theSmoke Damage Recovery Act (AB 1795, Gipson), which aim to strengthen claim handling standards and improve recovery for future disaster survivors. Examination finds a pattern of delay and denial of claims: Department examiners reviewed a sample of220 claimsand found398 violationsof state law in 114 of those claims, many of which contained multiple violations. Major violations mirror the delays and denials reported by wildfire survivors to the Department, including: Since last January, the Department has recovered more than$280 millionfrom all insurance companies for survivors of the Eaton and Palisades fires through direct intervention. As of March 3, 2026, insurers have paid outmore than$23.7 billionto residential, commercial, and auto policyholders impacted by the fires. Legal action to help survivors now, and legislative action to prevent future harm: The Department has filed anAccusation and Order to Show Causeagainst State Farm -- the first step toward a public hearing before an administrative law judge. The filing alleges violations of theUnfair Insurance Claims Practices Actand related regulations, including the398 violationsidentified in the Market Conduct Examination and 34 additional violationsbased on consumer complaints. Under California Insurance Code Section 790.035, penalties may reach$5,000 per violation, or$10,000 for willful violations. Penalties may be imposed by the Commissioner following the administrative hearing. Commissioner Lara is also sponsoring two major bills to strengthen disaster-related consumer protections: Both bills advanced through legislative hearings in April and are now before the Senate and Assembly Appropriations Committees. Wildfire survivors experiencing delays, disputes, smoke damage issues, or other claim problems are encouraged to file a formal complaint with the Department of Insurance atinsurance.ca.govor by calling(800) 927-4357. Separate from today’s action, the California Department of Insurance, Consumer Watchdog, and State Farm General recently reached athree-party settlement agreementover State Farm’s emergency rate request, now set to be reviewed by an impartial Administrative Law Judge. At a later date, Consumer Watchdog may submit a request for intervenor compensation for its participation in the rate review and settlement process,as authorized under Prop. 103.If approved, the compensation amount – to be paid by State Farm policyholders – will be determined through a separate review process.Learn more about the intervenor compensation process at the Department’s website. Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to