By Zain Khan / Yahoo Finances New York Post / May 4, 202
State Farm is in crisis mode in California as officials look to slap it with massive fines and suspend its license over the handling of the deadly 2025 Palisades Fire.
The California Department of Insurance issued a damning verdict on the state’s largest insurer after an investigation into its actions towards customers following the inferno.
The probe, released in part on Monday, found a staggering 398 violations of state law in 114 of the 220 sample claims it looked into.
Among the key findings was claims were not investigated or resolved within required timelines, payouts were unreasonably low and policyholders were frequently reassigned to different adjusters — creating confusion some described as “adjuster roulette.”
Smoke damage claims, which made up nearly half of all complaints, were also mishandled, with delays, denials and missing explanations cited by investigators.
Insurance Commissioner Ricardo Lara said Monday: “Wildfire survivors came to us for help, and we followed the facts.
“Our investigation found that State Farm delayed, underpaid, and buried policyholders in red tape at the worst moment of their lives.”
The state is now seeking millions of dollars in penalties — potentially the largest ever pursued after a wildfire disaster this century. Getty Images
State Farm policyholders filed roughly 11,300 residential claims tied to the LA fires last year — nearly one-third of the 38,000 claims submitted across all insurers.
Officials say the violations uncovered suggest thousands of survivors may have been affected.
California is now seeking millions of dollars in penalties — potentially the largest ever pursued after a wildfire disaster this century.
The California Department of Insurance announced Monday that an expedited investigation found serious problems in how the company processed claims, with violations identified in more than half of the cases reviewed. GoFundMe
Officials are also ordering corrective actions to speed up payments and resolve outstanding claims.
“The Los Angeles fires were one of the most destructive disasters in our state’s history,” Lara said. “Survivors deserve a fair, timely recovery, not obstacles and delays.”
The California Post has reached out to State Farm, which could owe millions of dollars, for comment.
Last month the insurance giant said it paid customers more than $5.7 billion after over 11,300 claims were filled.
“We are proud of our response and of the people behind it,” Dan Krause, President of State Farm General said then.
Now, this legal filing will be the first step toward a public hearing before an administrative law judge.
If violations are confirmed, penalties could reach up to $5,000 per violation, or $10,000 if found to be willful.
Officials say the action is part of a broader push to strengthen consumer protections after disasters, with new legislation under consideration aimed at improving how claims—especially smoke damage cases—are handled.
Since early 2025, the department says it has helped recover more than $280 million for wildfire survivors. Overall, insurers have paid out more than $23.7 billion to those impacted by the fires.
Residents still facing delays or disputes are being urged to file complaints with the Department of Insurance.
The wildfires killed at least 31 people, forced more than 200,000 to evacuate, destroyed more than 18,000 homes and structures, and burned more than 57,529 acres of land.
