Los Angeles County has escalated its year-long dispute with State Farm from investigation to litigation, filing suit Monday against California's largest home insurer over how it handled claims from the January 2025 Palisades and Eaton fires.
The complaint, lodged in Los Angeles County Superior Court, accuses State Farm General Insurance Company of violating the state's Unfair Competition Law by systematically delaying and denying payouts to policyholders whose homes burned or suffered smoke damage.
According to the filing, the carrier rotated multiple adjusters through individual claims, withheld additional living expense payments that survivors needed to cover temporary housing, made misrepresentations that discouraged homeowners from pursuing valid claims, and failed to properly evaluate smoke damage in homes left standing after the fires.
"Wildfire survivors have spent far too long fighting to receive the benefits they paid for and counted on," County Supervisor Kathryn Barger said at a downtown press conference announcing the suit. Barger, whose district includes fire-ravaged Altadena, has been one of the more vocal county officials pressing the insurer since the county's Office of County Counsel opened a formal civil investigation into State Farm's claims practices last November.
County lawyers say that inquiry hit a wall. In court filings, the county alleges State Farm did not cooperate with document and information requests once the probe got underway, prompting officials to pursue the matter through litigation instead.
Monday's suit is not State Farm's first brush with regulators over its wildfire response. It follows an enforcement action brought earlier this year by the California Department of Insurance, which, after a market conduct examination of a sample of claims, alleged the insurer had violated state law in more than half the cases it reviewed, reportedly upwards of 400 discrete violations tied to late responses, inconsistent adjusting decisions and other claims-handling lapses. That case, brought by Insurance Commissioner Ricardo Lara, seeks what regulators have called the largest civil penalty pursued after a wildfire disaster this century, along with the power to suspend State Farm's license to write new business in California for up to a year.
The county's case is a distinct legal track from the state's. County assistant counsel Scott Kuhn told reporters it can secure something the Department of Insurance's action cannot: direct restitution for individual policyholders. That's a meaningful addition to an already crowded litigation calendar for the insurer. A separate class action, Ferrier v. State Farm Fire and Casualty Company, accuses State Farm and more than a dozen other carriers of conspiring to cancel wildfire-area policies before the fires broke out, a case the U.S. Department of Justice found notable enough to file a statement of interest in. And this month, defense lawyers for State Farm in an unrelated Los Angeles fire-claim dispute admitted to filing court documents containing AI-generated citations to cases, quotes and legal holdings that don't exist, an embarrassing episode that has added to scrutiny of how the insurer is managing its wildfire-era caseload.
Insurance Business has also tracked individual bad-faith suits from Palisades Fire policyholders alleging similar patterns of adjuster turnover and withheld remediation funds, and reported in December on how both county and state investigators were scrutinizing the insurer's use of artificial intelligence tools in claims review as part of the broader probe that preceded Monday's filing.
State Farm has defended its overall response to the disaster, which destroyed thousands of structures across Altadena and Pacific Palisades and ranks among the costliest wildfire events in state history. The insurer says it has now paid out more than $6 billion to policyholders affected by the fires and expects that figure to eventually top $7 billion. State Farm is by far the most exposed private carrier in the disaster: the company has said it insures roughly 250,000 homes and 880,000 vehicles in Los Angeles County alone, and more than a million homes statewide. Statewide, insurers of all kinds have now paid out more than $23.7 billion to residential, commercial and auto policyholders affected by the fires, according to the California Department of Insurance.
The insurer has previously disputed the state's characterization of its claims handling, saying it strongly disagrees with allegations that it intentionally underpaid or mishandled claims and arguing that survivors deserve "real solutions" rather than what it called a distorted account of its response.
For carriers operating in California's wildfire-exposed regions, the county's suit adds another layer of legal and reputational risk to an already difficult market. State Farm has spent much of the past two years rebuilding capital after halting new homeowners business in the state in 2023, and it secured a rate increase of as much as 17% for homeowners statewide this year, with steeper hikes for landlords and rental-dwelling policies, specifically to shore up reserves depleted by the fires. A prolonged legal fight with the state's most populous county, on top of the Department of Insurance's licensing threat, makes it harder for the insurer to convince regulators and the market that its California book has stabilized.
The county is seeking restitution for affected policyholders, along with penalties and injunctive relief. No hearing date had been set as of Monday afternoon, and it remains to be seen whether other California counties hit hard by wildfires in recent years will pursue similar unfair competition claims of their own.
