California says State Farm broke wildfire claims law hundreds of times

California's insurance commissioner on Monday accused State Farm of violating state law nearly 400 times in handling claims from the 2025 Los Angeles wildfires — findings that could cost the state's largest home insurer the right to write new policies for a year, according to the Department of Insurance.

The investigation exposes how California's largest home insurer treated survivors of fires that killed 31 people and destroyed more than 16,000 structures — and could reshape oversight of insurance companies across wildfire-prone Southern California, including Orange County.

The Eaton and Palisades fires, which swept through Los Angeles County in 2025, generated more than 11,000 claims filed with State Farm — roughly one-third of all wildfire-related claims filed statewide, ABC7 Los Angeles reported. The company said it has paid customers $5.7 billion as of April 2026.

Regulators examined 220 randomly selected State Farm claims and identified approximately 400 violations. The investigation found that in one case a policyholder's file sat untouched for nearly three months before the company began its investigation. In another, the company delayed payment for months despite having internally approved the claim. One claimant's file was passed among 12 different adjusters within a four-month span, according to the Department of Insurance.

State regulators also found that State Farm illegally denied reimbursement for hygienic testing to detect toxins in smoke-damaged homes — leaving policyholders without critical health-hazard documentation.

"Our investigation found that State Farm delayed, underpaid, and buried policyholders in red tape at the worst moment of their lives," Insurance Commissioner Ricardo Lara said in a statement. "That is unacceptable, and we are taking decisive action to hold them accountable."

State Farm disputed the findings. "We strongly disagree with the Department's characterization," the company said in a statement. "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."

California regulators are seeking to bar State Farm from writing new policies in the state for one year. Under state law, the maximum financial penalty — if violations are found willful — is approximately $4 million. State Farm is the second insurer targeted by regulators; the FAIR Plan, the state's insurer of last resort, faces a separate legal action for denying smoke damage claims, ABC7 Los Angeles reported.

The California Department of Insurance's enforcement action is part of a wider reckoning with how insurers responded to the state's most destructive wildfire season on record. For Orange County homeowners — many of whom hold State Farm policies in communities designated as high fire-risk zones — the outcome of these proceedings may set a lasting precedent for how California polices the industry.