California regulators are seeking to suspend State Farm’s license for up to a year and impose the largest penalty ever against a state insurer, alleging the company mishandled claims from the January 2025 Los Angeles wildfires. The Department of Insurance filed an administrative action after an investigation into 220 sample claims found 398 violations of state law in about half of them. Insurance Commissioner Ricardo Lara stated that State Farm delayed, underpaid, and burdened policyholders with excessive red tape during the claims process. The action could result in the insurer losing its “certificate of authority” for up to a year, preventing it from writing new policies during that period.
The California Department of Insurance launched a “market conduct exam” into State Farm General in June 2025 after receiving complaints from fire survivors in Pacific Palisades, Altadena, and nearby communities. The investigation found that the company failed to conduct thorough, fair, and objective investigations, delayed settlements, and made inadequate settlement offers. State Farm handled approximately 11,300 residential claims, nearly one-third of the total filed after the January 7 fires, which damaged or destroyed over 16,000 homes and killed 31 people.
The Department of Insurance is also seeking remedies against the FAIR Plan, an insurance pool for major private insurers, for denying smoke damage claims. The final penalty amount will be recommended by an administrative judge and finalized by Lara. State Farm is the second insurer to face legal action from the state over its handling of wildfire claims.