In Sacramento, California’s leading insurance authority announced an inquiry into State Farm following complaints about the company’s response to claims from the wildfires in the Los Angeles area earlier this year.
The investigation was spurred by accusations from survivors of the Palisades and Eaton fires, who reported delays and mishandling of their insurance claims concerning damage to their properties and the potential for smoke-related contamination.
These fires devastated numerous structures throughout Los Angeles, resulting in 30 deaths and displacing thousands, marking them as exceedingly costly natural disasters in U.S. history.
Ricardo Lara, California’s Insurance Commissioner, declared that the investigation aims to verify State Farm’s adherence to state regulations on consumer protection and claims processing.
“Californians deserve to be treated fairly and without unnecessary hassles from their insurers,” Lara stated. “It is unacceptable for anyone to be left in limbo, fighting for their rightful claims, or experiencing ongoing delays, which often discourage them from pursuing what they are owed.”
State Farm, catering to approximately 1 million homeowners in California, announced its cooperation with the state’s examination.
According to the company, they have handled around 13,000 fire-related claims, disbursing almost $4 billion to clients.
“Our commitment is towards aiding customers’ recovery, and we relate to those rebuilding their lives,” State Farm mentioned in a statement. “Our primary focus remains supporting our clientele through recovery from the largest fire catastrophe we have faced.”
Concerns have specifically risen among some survivors of the Eaton fire in Altadena about potential home contamination from lead, asbestos, and heavy metals due to smoke exposure.
Democratic State Senator Sasha Renée Pérez, representing the Pasadena region, advocated back in April for Lara to conduct an investigation into the apparent mishandling of claims.
“Those affected by the Los Angeles County fires are overwhelmed financially and emotionally due to State Farm’s claim delays and rejections,” she and other legislators expressed. “Despite consistently paying premiums, they face demand for exhaustive documentation, refusals despite explicit evidence, a complex claims process, and silence when seeking assistance post-disaster.”
Lara urged homeowners to formally complain about how State Farm handles claims to facilitate state action.
Additionally, the Insurance Department introduced a task force last month to suggest optimal strategies to manage smoke damage effectively.
A wildfire victims’ advocate applauded the investigation, viewing it as a “critical step toward accountability.”
“State Farm has been unfairly denying valid smoke damage claims, forcing already traumatized families by the Eaton and Palisades fires to decide between living in hazardous conditions or spending tens of thousands for repair,” said Kiley Grombacher from the California Fire Victims Law Center. “We stand prepared to ensure State Farm is held accountable.”
Even before these fires, insurers like State Farm had challenges conducting business in California.
In 2023, State Farm and other companies ceased issuing new residential policies due to the high risk of wildfires.
Last year, Lara had proposed regulations to allow insurers more flexibility in raising premiums if they agreed to cover more policies in high-risk zones. At that time, State Farm reported operational struggles.
The fires, which led to the destruction of over 16,000 structures, intensified existing challenges.
In May, California regulators authorized State Farm to increase their home insurance premiums by 17% statewide to help recover financially after the destructive fires.
Initially, State Farm sought a 22% hike, but after a hearing before an administrative judge, the company adjusted its request.
The revised measures currently applied involve a 38% increase for rental owners and 15% for tenants.
In April, lawsuits were filed by individuals who lost their homes, accusing State Farm and other insurers of colluding to abruptly stop coverage or refrain from writing new policies in high-risk fire areas, including previously burned regions.
This left homeowners underinsured and struggling with reconstruction, the lawsuit claims.
The American Property Casualty Insurance Association, the preeminent national trade group for home, auto, and business insurers, dismissed the lawsuit claims, asserting they supervise their members’ adherence to state antitrust regulations.