California's insurance regulator is seeking millions of dollars in penalties from State Farm after an investigation found the company mishandled claims from the 2025 Los Angeles-area wildfires. The state's insurance commissioner, Ricardo Lara, announced on Monday that State Farm violated state law hundreds of times in a sampling of 220 cases.
The maximum penalty allowed by law is approximately $4m if the violations are deemed 'willful'. Regulators may also temporarily suspend State Farm's licence, preventing the state's largest home insurer from writing new policies for a year. The two fires killed 31 people and destroyed more than 16,000 structures.
State Farm rejected suggestions it 'engaged in a general practice of mishandling or intentionally underpaying wildfire claims', calling the state's insurance market 'dysfunctional'. The company said it paid over $5.7bn on 13,700 claims related to the fires. It described the threat of suspension as a 'reckless, politically motivated attack'.
The investigation, launched last June, found roughly 400 violations including underpayment and slow claim processing. In one case, State Farm waited nearly three months before investigating a claim. The company also illegally denied payments for hygienic testing for smoke toxins.
This action comes amid California's insurance crisis, where companies are raising rates or pulling out of fire-prone areas. Last year, Lara approved a 17% premium increase for State Farm to help its finances. The state now allows insurers to consider climate change in pricing and pass reinsurance costs to consumers.
State Farm is the second insurer to face legal action over LA fire claims. The department is also seeking remedies against the Fair Plan for denying smoke-damage claims.
