California regulators are seeking to suspend State Farm’s license for up to a year and impose the largest fine ever against the state insurer, alleging it mishandled claims from the January 2025 wildfires in Los Angeles County.
The Department of Insurance announced Monday that it has filed an administrative action against the state’s largest home insurer after an investigation of 220 sample claims found 398 violations of state law in nearly half of them.
“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. “This is unacceptable, and we are taking decisive action to hold them accountable.”
Department spokesman Michael Soller said the action could result in the insurer losing its “certificate of authority” for up to a year, meaning it cannot write policies during that period.
State Farm has handled about 11,300 residential claims, or about a third of the claims filed after the Jan. 7 fire, which damaged or destroyed more than 16,000 homes and killed 31 people.
The department launched a “market conduct examination” in June 2025 into State Farm General — a subsidiary of the giant Bloomington, Illinois insurance company that handles California home insurance — after complaints from victims of fires in Pacific Palisades, Altadena and nearby communities.
The test results were released Monday in support of the legal action.
It found that the company failed to conduct a “thorough, fair and objective investigation” of claims in many cases, failed to make “prompt, fair and equitable settlements” and made settlement offers that were “unreasonably low”.
Other alleged violations include failure to respond timely to claims, providing factual or legal basis for claim denials and or assigning victims a primary point of contact after hiring three or more adjusters in a six-month period.
Legal filings also blame the company for allegedly mishandling smoke damage claims, including refusing to pay for clean testing for toxins.
The market conduct examination includes State Farm’s responses to each of 398 violations. The company denied its fault in some cases and acknowledged its fault in other cases, often saying it was due to problems with specific adjusters.
The company also noted that it held meetings with adjusters after hearing about the alleged violations.
Fines of up to $5,000 can be imposed for alleged violations and up to $10,000 for willful violations. The case will be heard by a state administrative law judge, who will provide a recommendation to Lara on possible penalties.
The department said the total amount of the breach could be millions of dollars.
State Farm, which says it has paid out more than $5.7 billion to fire victims, Issued a statement on April 22 It outlines five “commitments” to policyholders.
They included providing a single point of contact and better communication so that there are “fewer handoffs, less frequent clarifications and seamless support.”
Complaints about State Farm’s handling of claims emerged in the months following the January 7 wildfire, particularly regarding homes damaged by smoke damage, with victims claiming the insurer was reluctant to pay for clean testing for toxic substances.
Fire victims demanded action against the insurer and a moratorium on rate increases until State Farm addressed their complaints. They also called for Lara’s resignation, claiming that he was not enforcing the law, while arguing that the Market Conduct Test needed to do its job.
Some fire victims also complained that state regulators ignored their complaints about State Farm.
The insurer is also under investigation in Los Angeles County.
