California’s Insurance Commissioner Ricardo Lara has opened a formal investigation into State Farm, following growing complaints about how the insurer is managing claims linked to the devastating January wildfires near Los Angeles.
The state’s inquiry was prompted by reports from homeowners affected by the Palisades and Eaton fires, who allege the insurance giant delayed or improperly handled their claims, particularly in relation to structural damage and smoke-related contamination.
The wildfires, which ravaged large parts of Los Angeles County, destroyed more than 16,000 buildings, resulted in 30 fatalities, and displaced thousands. The events are being counted among the most financially destructive natural disasters in American history.
Lara announced the investigation Thursday, stating the review will focus on whether State Farm has adhered to California’s claims handling laws and consumer protection regulations.
“Californians deserve fair and comprehensive treatment from their insurance companies,” Lara said. “No-one should be left in uncertainty, forced to fight for what they are owed, or face endless delays that often lead consumers to give up.”
State Farm, which serves approximately one million homeowners in California, said it is cooperating with the regulatory review. The company reported receiving about 13,000 wildfire-related claims and said it has paid out roughly $4 billion to affected policyholders.
“We’re here to help our customers recover and we empathize with those who are rebuilding their lives,” the insurer said in a statement. “Our focus continues to be on supporting our customers in their recovery from the largest fire event we have ever experienced.”
Residents impacted by the Eaton Fire in Altadena have raised alarm over potential contamination from toxic materials such as lead, asbestos, and heavy metals carried by smoke into their homes.
In April, State Senator Sasha Renée Pérez of Pasadena urged the Department of Insurance to investigate what she and fellow legislators described as systemic claim processing failures.
“The survivors of the Los Angeles County fires are experiencing financial and emotional hardships due to State Farm’s delays and denials of their valid insurance claims," Pérez said. "Despite years of faithfully paying premiums, they have been met with excessive documentation demands, denial of claims despite clear evidence, a convoluted and arduous claims process, and silence when seeking help after the disaster.”
Commissioner Lara has encouraged homeowners to file official complaints about claim issues to support the department’s enforcement actions. Last month, his office formed a task force to explore best practices for managing smoke damage claims.
Kiley Grombacher, co-founder of the California Fire Victims Law Center, welcomed the probe, describing it as an essential move toward corporate responsibility.
“State Farm is unjustly denying legitimate smoke damage claims, forcing families already harmed by the Eaton and Palisades fires to make the impossible choice of living in toxic homes or paying tens of thousands out of pocket for remediation. We stand ready to hold State Farm accountable,” Grombacher said.
Even before the January wildfires, insurers were facing challenges operating in California. In 2023, State Farm and other providers began halting the issuance of new homeowner policies due to growing wildfire risk and underwriting losses.
That same year, Lara introduced a set of regulatory reforms intended to permit insurers to adjust rates more flexibly if they expanded coverage in high-risk zones. At the time, State Farm said its financial model in California was under severe pressure.
Following the fires, state regulators approved a 17% statewide rate increase for State Farm’s home insurance customers this May, aimed at rebuilding the company’s reserves. The insurer had initially sought a 22% hike but scaled back after a recent administrative hearing. New rates effective this month include a 38% increase for landlords and 15% for tenant policies.
In April, a group of fire victims filed a lawsuit alleging that State Farm and other insurers colluded to “suddenly and simultaneously” cancel coverage or stop writing new policies in fire-prone areas — including those recently devastated by the blazes. The lawsuit claims this practice left homeowners underinsured and financially stranded in their efforts to rebuild.
The American Property Casualty Insurance Association, which represents home, auto, and commercial insurers nationwide, dismissed the lawsuit’s claims, stating that it monitors compliance with antitrust laws and sees no basis for the allegations.
