California seeks millions of dollars from State Farm for handling of claims after 2025 LA wildfires

A tattered U.S. flag flaps in the wind over the remains of a mobile home park that was destroyed in the Palisades Fire along the Pacific Ocean, Dec. 5, 2025, in the Pacific Palisades neighborhood of Los Angeles.

SACRAMENTO, Calif. — California is seeking millions of dollars in penalties from State Farm after an investigation found the insurance company was slow to investigate and underpaid claims from the 2025 Los Angeles-area wildfires, regulators announced Monday.

State Farm violated the law hundreds of times in a sampling of 220 cases, Insurance Commissioner Ricardo Lara said. The maximum penalty amount allowed by law would be around $4 million if State Farm is found to be “willful” in violating state law. Regulators also want to prohibit State Farm, California’s largest home insurer, from writing new policies for a year in the state.

The two fires were devastating -- they led to the deaths of 31 people and destroyed more than 16,000 structures.

State Farm said in a statement it rejected any suggestions it “engaged in a general practice of mishandling or intentionally underpaying wildfire claims” and called the state’s insurance market “dysfunctional.” The company said it has paid out more than $5.7 billion on 13,700 auto and home insurance claims related to the fires.

“The threat to suspend State Farm General’s ability to serve customers over primarily administrative and procedural errors is a reckless, politically motivated attack that could ultimately cripple California’s homeowners insurance market,” the statement said.

Lara launched the investigation last June after survivors of the Palisades and Eaton fires said that State Farm was delaying and mishandling claims regarding damage to their homes and possible contamination from smoke.

“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,” Lara said in a statement.

The department looked at 220 random claims filed to State Farm and found roughly 400 violations. They included underpayment and slow or inadequate claim processing. State Farm handled about one third of all residential claims filed after the fires, state officials said. The department said thousands of people might be affected by the unlawful behaviors.

In one case, State Farm waited nearly three months before starting to investigate a claim, according to the state. In another, the company delayed paying a customer for months while internally acknowledging the payment should have been approved. The company also caused confusion for a customer after assigning a dozen claim adjusters to the case within four months.

State Farm also illegally denied payments for hygienic testing for toxins in smoke damage claims, the legal filings said.

State Farm is the second insurance company to face legal actions from the state over its handling of LA fire claims. The department is also seeking remedies against the FAIR Plan for denying smoke damage claims. The plan is an insurance pool that all the major private insurers pay into, and the plan then issues policies to people who can’t get private insurance because their properties are deemed too risky to insure.