Ricardo Lara, California’s Insurance Commissioner, announced a formal investigation into State Farm on Thursday, as complaints continue to mount about the insurer’s handling of claims from the catastrophic wildfires in Los Angeles.

The so-called “market conduct examination” is a tool used when there is evidence of broad consumer complaints, according to a spokesperson for the department. It’s the fourth time that State Farm General Insurance Company — the state’s largest insurer, which covers 1 out of every 5 homes in California — has been the subject of such an investigation since 2014, said Michael Soller, a deputy insurance commissioner.

“Some troubling patterns that my staff will investigate include the frequent reassignment of multiple adjusters with little continuity in communication, inconsistent management of similar claims, and inadequate record-keeping,” Lara said in a statement. “These issues create unnecessary stress, prolong recovery, and erode trust.”

Devastating Fires Leave Unprecedented Destruction

The multiple fires that erupted Jan. 7 in Eaton Canyon and on a hillside in Pacific Palisades have left a burn zone unlike almost any other — more than 16,000 homes, businesses and other structures were obliterated and many others were damaged by toxic smoke. The fires are being described as among the most destructive in California’s history, and have displaced thousands of people.

Complaints against State Farm have been growing from the first weeks after the fire.

A group of survivors from Altadena, the community flanking Eaton Canyon where one of the blazes started, have collected more than 400 complaints from victims whose homes were insured by State Farm. The homeowners, who first found each other on a WhatsApp group for pickleball enthusiasts before migrating to the platform Discord, describe a pattern of delays and foot-dragging that they say has worn them down.

Homeowners Report Pattern of Delays and Low Estimates

Among the complaints is a pattern of rotating adjusters — where the same damaged home is assessed by one adjuster, only to be passed off to another, then another, forcing the homeowner to start from scratch with each new consultant, said Joy Chen, a former deputy mayor of Los Angeles, who runs the Eaton Fire Survivors Network, which collected the accounts.

Another common complaint, said Chen, is families receiving loss estimates for their damaged or destroyed homes that are as low as $300 per square foot — a fraction of the approximately $900 per square foot it costs to rebuild, she said.

A through line in the complaints against State Farm, as well as against other insurers, has been the lack of attention to homes that are damaged by the toxic fumes unleashed from the fire — smoke that seeps into walls and insulation and requires the removal of insulation, drywall, flooring, and other parts of the home in order to get rid of the contaminated materials, an expensive process that insurers have been slow to acknowledge, and even slower to pay. Last month, Lara announced a task force to create statewide standards for evaluating and paying smoke-damage claims.

“All of these things add up so that people will never be able to go home,” said Chen. “This is happening with the largest insurer in the state — and what that means is that it puts downward pressure on the entire market.”

State Farm Responds as Investigation Proceeds

In an emailed statement, Sevag Sarkissian, a spokesperson for State Farm, said that the company is cooperating and will “comply with the market conduct exam process,” adding that the LA fires are the largest fire event that State Farm has faced.

“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,” he said. State Farm has already paid nearly $4 billion to its customers in California following the recent wildfires, he said.

This is the fourth time State Farm will be the subject of a review in just over a decade. The past reviews included regular examinations, conducted for all insurance companies operating in the state, as well as targeted investigations such as the one announced Thursday, said Soller.

Past inquiries have resulted in the recovery of hundreds of millions of dollars in claims for survivors, Soller said, and companies have been required to improve claims practices. When systemic issues are identified, Soller said that they can prompt regulatory or legislative action.

“If State Farm is wrongfully denying my neighbors coverage, we need to know why — plain and simple,” John Harabedian, a California assembly member who represents Altadena, said in a statement.

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This article originally appeared in The New York Times.

By Rukmini Callimachi/Isadora Kosofsky
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