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Top California insurance regulators began investigating state farms on Thursday on handling claims from January wildfires in the Los Angeles area.
The investigation comes after Palisade and Eton fire survivors said the state’s biggest home insurance company had delayed and falsely claimed claims about damage to their homes and possible smoke contamination.
The flames destroyed thousands of buildings around Los Angeles, killed 30 people and drove away thousands of other people. They were estimated to be one of the most expensive natural disasters in US history.
California Insurance Commissioner Ricardo Lara said the investigation will consider whether the company is complying with the state’s consumer protection and claims handling laws.
“Californians deserve fair and comprehensive treatment by insurance companies,” Democrats said in a statement. “No one should be left in uncertainty, forced to fight for what they owed, or face endless delays that often lead to consumers giving up.”
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The state farm, which has about 1 million home insurance clients in California, said it will help with the state review. The insurance company has received approximately 13,000 fire-related claims and paid customers about $4 billion, the company said.
“We are here to help our customers recover. We empathize with those who are rebuilding their lives,” State Farm said in a statement. “Our focus continues to support our customers in recovery from the biggest fire event we have ever experienced.”
Survivors of the Eton fire in Altadena are concerned about possible lead, asbestos and heavy metal contamination in the home due to smoke.
State Sen. Sasha Rene Perez, a Democrat representing Pasadena, called on Lara in April to begin an investigation into the mistreatment of her claims.
“Los Angeles County fire survivors have experienced financial and emotional difficulties due to delays in state farms and denial of valid insurance claims,” she and other lawmakers said at the time. “Despite their faithful payments over the years, they have been filled with excessive demand for written documents, despite clear evidence, a complicated and laborious claims process, and silence in seeking help after a disaster.”
Lara said homeowners should file formal complaints regarding the handling of state farm claims to help the state take action. Last month, the Ministry of Insurance issued a task force to recommend best practices to deal with smoke damage.
Advocates for wildfire victims praised the investigation as “an important step towards accountability.”
“State Farm unfairly rejects allegations of legitimate smoke damage, forcing families who have already been harmed by the Eton and Palisade fires to live in toxic homes or pay tens of thousands of people for relief, for tens of thousands of people.
Insurance companies, including State Farm, have had difficulty doing business in California even before the wildfires. In 2023, state farms and others stopped issuing housing policies due to the risk of wildfires.
Last year, Lara announced regulations aimed at giving insurance premiums more latitudes to increase latitudes in exchange for more policies in high-risk regions. State Farm said the company was struggling at the time.
The wildfires that destroyed more than 16,000 buildings have become even worse.
In May, state regulators allowed state farms to raise 17% premiums statewide for California home insurance clients, helping the company recapitalize after an expensive wildfire.
State farms that provide renewals to policyholders affected by wildfires in LA County
State Farm initially asked homeowners to increase the rate of 22%, but revised their recent hearing before an administrative judge. New rates this month include a 38% increase in rental owners and 15% of tenants.
Those who lost their homes in the fire sued in April alleged that state farms and other insurance companies either lost coverage “suddenly, at the same time” or conspired to write new policies in fire-prone areas, including burnable areas. So the lawsuit alleges that homeowners have insurance and are struggling to rebuild.
The American Real Estate Victim Insurance Association, the largest national trade association representing home, automobile and business insurance companies, said it is loyal to call the lawsuit and is monitoring it to ensure its members comply with the state’s antitrust laws.
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