State Farm faces millions in penalties for LA wildfire claims

State Farm could face millions of dollars in penalties in California after the state's insurance regulator alleged the firm mishandled claims related to the 2025 Los Angeles wildfires.

Thousands of survivors could be affected, according to a statement Monday from the California Department of Insurance. The agency said an expedited investigation found a pattern of "unlawful behavior" by State Farm, which received about 11,300 residential claims stemming from the fires.

On top of the penalties, the largest sought by the regulator after a disaster this century, the department is requiring State Farm to speed up payments to policyholders and resolve outstanding claims. The agency said its filing would lead to a public hearing before an administrative judge, after which the penalties could be imposed.

"Our investigation found that State Farm delayed, underpaid and buried policyholders in red tape at the worst moment of their lives," California Insurance Commissioner Ricardo Lara said in the statement. "That is unacceptable, and we are taking decisive action to hold them accountable."

State Farm said it strongly disagrees with the findings, and that the state's "dysfunctional" insurance market is plagued by regulatory delays and uncertainty that discourages insurers from participating. 

"Wildfire survivors deserve real solutions — not a distorted picture of State Farm's response," the firm said in a statement. "We reject any suggestion State Farm engaged in a general practice of mishandling or intentionally underpaying wildfire claims, and we will respond through the process."

Last June, California's insurance regulator launched a formal investigation into State Farm's handling of claims related to the wildfires, after groups of survivors complained that the process could lead to confusion and delayed payouts.

Earlier this year, the insurer landed in the crosshairs of President Donald Trump, who said on social media the company and other insurers were "absolutely horrible to people that have been paying them large premiums for years."