California is sending a major message to State Farm after accusing the insurance company of mishandling wildfire claims tied to the devastating January 2025 fires in Los Angeles County.
The Los Angeles Times reported on the state's proposed enforcement actions, including suspending State Farm's license to sell policies in the state for up to a year and imposing millions of dollars in penalties.
The Department of Insurance said its probe, starting last June, into the company's handling of wildfire claims uncovered 398 alleged violations of state law across 220 sampled claims.
"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 a statement, per the Times.
State Farm, the state's largest insurer, is nearly one-third of the way through handling all of the claims from the fires, per the Times. The investigation revealed that the company didn't properly meet customers' needs.
Regulators allege that State Farm often failed to conduct reasonable and comprehensive investigations, respond in a timely manner, clearly explain denials, and provide prompt and equitable settlements.
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They also said the company mishandled smoke-damage claims by refusing to pay for testing, among other violations. Residents quickly complained on this front after the fires.
In response to the allegations, State Farm accepted culpability in some cases while denying it in others, per the Times. It cast blame on specific insurance adjusters and said it would follow up with them after hearing of the alleged malpractice.
A state administrative law judge will rule on the potential penalties for State Farm. Penalties can include fines of up to $10,000 if the judge rules they were intentional.
State Farm said it has paid out more than $5.7 billion to fire victims. That number and the resulting damage are only set to rise as California pushes the company to comply with the law and imposes penalties for past instances when it didn't.
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"That is unacceptable, and we are taking decisive action to hold them accountable," Lara said in the statement.
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