California Insurance Commissioner Ricardo Lara on Thursday said he has launched a formal investigation into State Farm’s handling of thousands of insurance claims from wildfire survivors affected by the Palisades and Eaton wildfires in January.
The California Department of Insurance initiated a market conduct examination of State Farm General Insurance Company, expanding its ongoing investigation into consumer complaints against the insurer.
Related: Homeowners Suing USAA and AAA Insurers Over LA Wildfires
The L.A. wildfires killed 29 people, and damaged or destroyed thousands of properties. The fallout of the fires included large losses for major California insurers, including State Farm. The carrier is asking the California Department of Insurance to approve a large rate increase. According to the California Department of Insurance, as of May 12, insurance companies have paid out nearly $17 billion to residential and commercial insurance policyholders impacted by the Eaton and Palisades Fires.
The examination will assess whether State Farm has complied with California’s consumer protection and claims handling laws, according to Lara.
The CDI has received general allegations from wildfire survivor groups regarding State Farm’s processing of claims, but a formal complaint is needed for the CDI to take action and advocate for consumers, according to Lara.
One area of concern relates to how some insurers, including State Farm, are handling smoke damage claims, according to Lara.
Related: Viewpoint: Smoke Damage from LA Wildfires Leaves Questions to Be Answered
Lara recently announced the creation of a Smoke Claims & Remediation Task Force, bringing together public health experts, remediation specialists, and consumer advocates to develop consistent standards for smoke remediation.
“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,” Lara said in a statement. “While there are national standards for insurance claims handling, they can be vague and inconsistently applied, especially during large-scale, climate-driven disasters.”
According to a statement from State Farm, the carrier is cooperating with the CDI and that it will comply with the market conduct exam.
“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,” the statement reads.
“Our efforts will remain on serving all our customers and meeting our obligations under the contract while providing the necessary information to the CDI. The Department routinely examines all insurance companies. These exams help ensure processes and procedures are in full compliance with state regulations.”
As of June 10, State Farm has received 12,855 total claims related to the fires and have paid more than $3.96 billion to our California customers, according to State Farm.
A market conduct examination is an involved, and fact-based review that typically takes several months. The CDI is currently at a stage in the claims process for the wildfires that allows for a more comprehensive regulatory review for an examination of this magnitude and importance. Insurers are now making payment decisions, enabling the Department to evaluate adjuster practices and thoroughly assess State Farm’s methods across a wide range of claims handling, according to Lara.
Topics
Catastrophe
Natural Disasters
California
Wildfire
Claims
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