CA says State Farm violated the law in handling of insurance claims after Eaton, Palisades fires

LOS ANGELES -- California's top insurance regulator says the state is seeking millions of dollars in penalties from State Farm after an investigation found the insurance company violated state law while handling claims from the Eaton and Palisades fires in 2025.

The video featured in the media player above is from a previous report and will be updated.

State Farm violated the law hundreds of times for delaying claim investigations, providing unreasonable payouts and failing to communicate with policyholders, Insurance Commissioner Ricardo Lara said Monday.

Regulators are also seeking to prohibit State Farm, the state's largest home insurer, from writing new policy for a year.

RELATED: LA County launches State Farm probe following Eaton, Palisades fires

Lara launched the investigation last June after survivors of the Palisades and Eaton fires said that State Farm was delaying and mishandling claims regarding damage to their homes and possible contamination from smoke.

"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," Lara said in a statement.

State Farm rejected the claims in a statement, saying in part: "We strongly disagree with the Department's characterization. We reject any suggestion State Farm engaged in a general practice of mishandling or intentionally underpaying wildfire claims, and we will respond through the process."

The two fires were devastating - they led to the deaths of 31 people and destroyed more than 16,000 structures.

MORE: Eaton Fire victim finally gets help from State Farm after lengthy insurance battle

The department looked at 220 random claims filed to State Farm and found nearly 400 violations. They included underpayment and slow or inadequate claim processing. State Farm received more than 11,000 claims from the Los Angeles wildfires, accounting for roughly a third of all claims filed, state officials said. The company said in April it's already paid customers more than $5.7 billion. The department said thousands of people might be affected by the unlawful behaviors.

In one case, State Farm waited nearly three months before starting to investigate a claim, according to the state. In another, the company delayed paying a customer for months while internally acknowledging the payment should have been approved. The company also caused confusion for a customer after assigning a dozen claim adjusters to the case within four months.

State Farm also illegally denied payments for hygienic testing for toxins in smoke damage claims, the legal filings said.

The final amount of penalties will be recommended by an administrative judge and finalized by Lara. The maximum amount allowed by law would be around $4 million if State Farm is found to be "willful" in violating state law.

State Farm is the second insurance company to face legal actions from the state over its handling of LA fire claims. The department is also seeking remedies against the FAIR Plan for denying smoke damage claims. The plan is an insurance pool that all the major private insurers pay into, and the plan then issues policies to people who can't get private insurance because their properties are deemed too risky to insure.