California Officially Launches State Farm Investigation After LA Fire Complaints

The California Department of Insurance will investigate State Farm for its handling of the Los Angeles fires.

The decision was made earlier this month after public outcry from survivors of the January 2025 wildfires. Many survivors claim State Farm engaged in unfair claims handling practices – from denying smoke damage claims to delaying payouts.

At the same time, State Farm continues to ask the California Department of Insurance to approve double-digit rate hikes.

California approved a 17% rate hike for State Farm back in May. Then, in June, California Department of Insurance commissioner Ricardo Lara authorized State Farm to raise home insurance premiums 22%, on average, by agreeing to certain conditions.

Why Are State Farm Policyholders Complaining?

State Farm is the largest home insurance company in California, covering approximately 1 in 5 homes across the state.

After the January 2025 fires, State Farm policyholders have complained about poor claims handling, unfair treatment, and long delays, among other issues.

These problems came to a peak at a recent Department of Insurance town hall, where commissioner Lara suggested his organization could formally investigate State Farm in response to complaints.

Some of the issues raised by policyholders include:

• Denial of smoke damage claims
• Frequently changing claims adjusters
• Bad claims management
• Poor recordkeeping
• Delayed payment

State Farm Has Paid $4 Billion, Expects to Pay $8 Billion Total, for Los Angeles Wildfires

State Farm is aware of policyholder criticism and continues to push back against complaints.

The state’s largest property insurance company has frequently published evidence-based responses via its newsroom in an attempt to separate myth from fact.

In a June 2025 statement, for example, State Farm reminded Californians it had already paid $4.03 billion on 12,870 fire claims and plans to ultimately pay around $7.6 billion in total claim payments.

State Farm reminded policyholders that the 2025 Los Angeles fires were the costliest disaster in company history – and the largest fire event ever experienced in California.

State Farm also blamed “outdated regulations in California’s insurance market” for impacting insurance coverage. Specifically, State Farm blamed lengthy rate approvals and restrictions on pricing to risk as creating “challenge” for the insurer:

Outdated regulations in California’s insurance market, such as lengthy rate approvals and restrictions on pricing to risk, have presented challenges. Proposition 103 has hindered the ability to adjust rates quickly to match the evolving risks of insuring property in the state.

California voters passed Proposition 103 in 1988. The act was intended to protect consumers from arbitrary insurance rates and practices while creating a competitive marketplace. Insurers, meanwhile, argue the system makes it hard to price insurance based on risk.

State Farm also lashed out at California’s FAIR Plan in the statement, describing it as “unsustainable.”

Critics Claim DOI Investigation is “Designed to Protect These Insurance Companies”

For policyholders unhappy with State Farm, a State Farm investigation may seem like a good thing.

Critics, however, aren’t so happy. According to Harvey Rosenfield, an attorney and the author of Proposition 103, Department of Insurance investigations tend to take “years” and are “not going to do anything” to help survivors.

Here’s how Rosenfield, who is also an author at Consumer Watchdog, explained the situation in a statement to KTVU:

That process [the Department of Insurance investigation] is designed to protect these insurance companies. It’s secret. It’s behind closed doors. It takes years. It’s not going to do anything to help survivors get their claims paid.

Other states have more punitive systems for insurers caught breaking the rules. As KTVU explains, Washington and Colorado have laws that assess triple damage penalties on insurers who delay or deny claims unfairly. In other words, an insurer who unfairly denied a $10,000 fire claim in Denver or Spokane could be forced to pay $30,000 after an investigation.

State Farm, for its part, plans to cooperate with the Department of Insurance investigation, encouraging a “fair review”:

State Farm…is cooperating with the California Department of Insurance (CDI) and will comply with the market conduct exam process. A fair review will find that thousands of State Farm customers are being helped by our teams on the ground in Los Angeles County and are very satisfied.

California CDI commissioner Lara, meanwhile, believes the investigation will help ensure California homeowners receive fair treatment from their insurer without delays:

Californians deserve fair and comprehensive treatment from their insurance companies. 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.

Stay tuned to determine if State Farm will face punishment – or if the Department of Insurance finds the Golden State’s largest insurer processed claims fairly after the devastating January 2025 Los Angeles fires.