California Regulators Consider Suspension of State Farm’s License

California insurance regulators are reportedly looking to suspend State Farm’s license due to alleged mishandling of claims related to the catastrophic wildfires in Los Angeles in 2025.

On Monday, the Department of Insurance announced plans to file an administrative lawsuit against State Farm, which is California’s largest home insurance provider, following an investigation into 220 sample claims. About half of these claims apparently revealed 398 violations of state law, according to the Los Angeles Times.

Insurance Commissioner Ricardo Lara stated, “State Farm’s investigation indicated that policyholders faced delays, underpayments, and excessive bureaucracy at perhaps the most challenging times of their lives. That’s simply unacceptable, and we intend to take firm steps to hold them accountable.”

Michael Solar, a spokesperson for the department, mentioned that a cease-and-desist order had been issued to prevent State Farm from engaging in what the department considers deceptive practices. The proposed suspension of the insurer’s “certificate of authority” could last up to a year, effectively halting any new insurance policies.

The department initiated an inquiry in June 2025 following complaints from fire survivors in areas like Pacific Palisades and Altadena. This led to a “market conduct inspection” of State Farm General, a subsidiary of a prominent home insurance company based in Bloomington, Illinois.

The findings indicated that the company often did not conduct “thorough, fair and objective investigations” of claims. Additionally, it reportedly failed to reach “prompt, fair and equitable settlements” and offered what were deemed “unreasonably low” settlement amounts.

Other complaints included a lack of timely responses to claims, insufficient explanations for claim denials, and failure to provide a consistent point of contact after assigning multiple expert witnesses within a short timeframe.

Moreover, the department accused State Farm of not adequately addressing smoke damage claims from homeowners and ignoring requests to test for hazardous materials.

State Farm has denied responsibility for some of the violations but has admitted fault for others, suggesting that individual adjusters may be accountable for those issues.

According to reports, State Farm has now become the “second-largest insurance company,” and the state has taken legal action against it regarding compensation claims linked to the Los Angeles wildfires.