California Department of Insurance Targets State Farm

The California Department of Insurance (CDI) wants to take major enforcement action against State Farm for “mishandling” claims submitted by victims of the 2025 wildfires in the Los Angeles area. This decision comes after Insurance Commissioner Ricardo Lara ordered a Market Conduct Examination. It found the insurer exhibited “unlawful behavior” in close to half of the claims reviewed.

“Wildfire survivors came to us for help, and we followed the facts,” Lara said. “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.”

Department spokesman, Michael Soller said the CDI is looking for a cease and desist order that will stop State Farm from engaging in “unfair or deceptive” practices. Soller also said State Farm’s ability to write new business could be suspended for up to a year.

State Farm insures over a million homes in California and, if suspended, when renewal time comes it won’t be able to issue a new policy. That could lead to a whole new crisis for California’s often beleagured homeowners.

The final decision will be made by an administrative law judge. The judge will review the facts and send a recommendation to Lara on what ought to be done.

Here’s how all this came about. Policyholders submitted 11,300 residential claims. That’s a third of the 38,835 claims filed from the end of the year fires in 2025. The department reviewed a sample of 220 claims and found 398 violations in the 220 claims.

Among the violations is the failure of State Farm to start investigating claims within the 15 days require by law. The company is accused of failing to accept or deny claims within 40 days and didn’t pay the claims it accepted within 30 days of the decision.

The Department of Insurance also accused State Farm of underpaying claims and offering low-ball settlements. The company is accused of reassigning adjusters so someone filing a claim wasn’t able to have any continuity in the pursuit to get the claim resolved.

Millions of dollars in fines and other penalties will be the ultimate decision. Plus, the department of insurance will require State Farm to take “corrective actions” to speed up payments in the future and to resolve outstanding claims more quickly.

“The Los Angeles fires were one of the most destructive disasters in our state’s history. Survivors deserve a fair, timely recovery, not obstacles and delays,” Lara added. “We are taking a two-pronged approach: legal action to address State Farm’s conduct, and legislative action to ensure this does not happen again.”

State Farm — as expected — denies the accusations.

“California’s homeowners insurance market is the most dysfunctional in the country,” State Farm said in a statement. “The California Department of Insurance should take responsibility for regulatory delays and uncertainty that have contributed to fewer choices and higher costs for consumers.”

The company says it has paid over $5.7 billion to 11,700 of the wildfire victims.

Source link: California Department of Insurance — https://bit.ly/3R7xAHz

Source link: Los Angeles Times — https://bit.ly/42TJyHi