California regulators are seeking to suspend State Farm’s license for up to a year and levy the largest penalty ever against a state insurer, alleging it mishandled January 2025 wildfire claims.
The Department of Insurance announced Monday it filed an administrative action against the state’s largest home insurer after an investigation into 220 sample claims found 398 violations of state law in about half of them.
“Our investigation found that State Farm delayed, underpaid, and buried policyholders in red tape at the worst moment of their lives,” Insurance Commissioner Ricardo Lara said in statement. “That is unacceptable, and we are taking decisive action to hold them accountable.”
The action could result in the insurer losing its “certificate of authority” for up to a year, meaning it could not write policies during that period, said department spokesperson Michael Soller.
State Farm has handled about 11,300 residential claims, or nearly one third of those filed after the Jan.7 fires that damaged or destroyed more than 16,000 homes and killed 31 people.
The department in June 2025 launched a “market conduct exam” into State Farm General — the subsidiary of the giant Bloomington, Ill. insurer that handles California home insurance — after complaints by victims of the fire in Pacific Palisades, Altadena and nearby communities.
The results of the exam were released Monday in support of the legal action.
It found that the company failed in numerous cases to pursue a “thorough, fair and objective investigation” into claims, failed to come to “prompt, fair, and equitable settlements” and made settlement offers that were “unreasonably low.”
Other alleged violations included a failure to give timely responses to claims, provide a factual or legal basis for claim denials and or give victims a primary point of contact after assigning three or more adjusters in a six-month period.
The legal filing also faults the company’s allgedly poor handling of smoke damage claims, including denials of payments for hygienic testing for toxins.
The market conduct exam includes State Farm’s responses to each of the 398 violations. The company denied it was at fault in some cases and admitted it was at fault in others, often saying it was due to issues with specific adjusters.
The company also noted it held meeting with adjusters after hearing about the alleged violations.
The alleged violations carry a fine of up to $5,000 and up to $10,000 if they are found to be willful. The case will be heard by a state administrative law judge, who will provide a recommendation to Lara on a the possible penalty.
The department said the violations could total in the millions of dollars.
State Farm, which says it has paid more than $5.7 billion to fire victims, released a statement April 22 that outlined five “commitments” to policy holders.
They included providing single points of contact and improved communication so there are “fewer handoffs, fewer repeated explanations, and seamless support.”
Complaints about State Farm’s claims handling cropped up with a couple of months of the Jan. 7 wildfires, especially in regard to houses damaged by smoke damage, with victims claiming that the insurer was reluctant to pay for hygienic testing for toxins.
Fire victims called for a crackdown on the insurer and to bar a rate increase State Farm was seeking until it resolved their complaints. They also called for Lara’s resignation, claiming he was not enforcing the law, while he contended the market conduct exam needed to take its course.
Some fire victims also complained that state regulators ignored their complaints about State Farm.
Los Angeles County also has an ongoing investigation into the insurer.
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