I am beginning to lose count of how many lawyers State Farm needs to defend what are increasingly allegations about its internal claims operations. In Oklahoma, the Attorney General has sued over the alleged Hail Focus Initiative, while private policyholder cases dig through State Farm’s wind and hail practices. In California, the Department of Insurance has brought an enforcement action, a federal class action is challenging State Farm’s contents depreciation methodology, and now Los Angeles County has filed a 107-page consumer protection lawsuit over the handling of Eaton and Palisades wildfire claims. 1 State Farm’s alleged systemic claims practices seem to be producing a systemic litigation and public relations problem. Meanwhile, football season is arriving, and Jake from State Farm will presumably keep appearing on our television screens assuring millions of fans that the real deal is a good neighbor. Somebody in Bloomington may want to make certain Jake does not accidentally wander into State Farm’s litigation department.
Los Angeles County filed its lawsuit on August 31. This is not an individual insurance bad faith action. The lawsuit alleges public nuisance, false advertising, and violations of California’s Unfair Competition Law. The County seeks restitution for policyholders, civil penalties, injunctive relief, and some extraordinary forms of claims-handling reform.
The complaint is worth reading because it paints a much broader picture than a collection of policyholders arguing with adjusters over estimates. Los Angeles County alleges “systematic, willful, and widespread” violations involving how State Farm marketed its coverage and how it handled claims following the January 2025 fires. The County says State Farm policyholders encountered unreasonable investigation delays, underpayments, adjuster churn, difficulties communicating with claims representatives, failures involving additional living expenses, misrepresentations about coverage, and suppression of smoke and contamination claims.
As I always remind readers, a complaint contains unproven allegations. State Farm deserves the opportunity to defend itself. State Farm publicly says the County’s characterization does not reflect its wildfire response. It reports paying more than $6.2 billion arising from the Los Angeles fires, including approximately $1 billion for smoke damage, and says about 78 percent of claims have been closed. State Farm says it evaluates each remaining claim according to the facts and the policy purchased.
Still, the County did not manufacture this controversy out of thin air. The California Department of Insurance (CDI) conducted a market conduct examination involving 220 randomly selected State Farm claims and reported 398 violations. The County complaint states that another 34 violations were identified by the Department’s Consumer Services Division. CDI has separately brought an administrative enforcement action. Los Angeles County is going further by seeking restitution for the policyholders themselves.
The allegation that jumped off the page at me concerns contents claims and depreciation, because this is something our firm repeatedly sees in California property insurance claims. The County alleges that State Farm required some total-loss policyholders to reconstruct virtually everything accumulated in their homes over decades, item by item, providing ages, conditions, values, photographs, links, and comparable products even when the submitted contents already exceeded policy limits. The complaint says some policyholders then had to resubmit the same information in different forms, while State Farm applied what the County describes as opaque and unexplained depreciation.
I invite property claims professionals to stop and think about the human side of this using the Golden Rule. Your house has burned to the ground. Your photographs, clothing, furniture, kitchenware, electronics, tools, books, children’s belongings, heirlooms, and forty years of accumulated life are gone. Now sit down and build a spreadsheet recreating every spoon, shirt, lamp, chair, toaster, and book you owned before somebody decides what percentage should be depreciated.
I have long thought and publicly taught that contents adjustment after a total loss can become one of the cruelest exercises in the insurance claims process if common sense is removed from the process. I dedicated one chapter, When The Insurance Adjuster Is You, to the topic in my book, PayUP! I have discussed it in a number of other blog posts, including “Why Are California Insurers Putting Their Policyholder Customers at Risk For Their Health?”
The Los Angeles County complaint asks for much more than a declaration regarding future claims. It asks the court to require State Farm to identify and readjudicate wildfire claims in which personal-property benefits were delayed, reduced, depreciated, or withheld after inventories exceeded policy limits. It seeks written explanations of depreciation and valuation methods, claim-calculation worksheets, depreciation schedules, and document-intake records. The County also asks the court to order the reopening and readjudication of claims found through an independent audit to have been handled unlawfully, potentially using independent adjusters approved by the court.
The smoke and contamination allegations are equally important. Many homes survived the flames but allegedly remained contaminated by smoke, soot, ash, lead, asbestos, and other substances. The complaint alleges that State Farm sometimes resisted appropriate environmental testing and remediation, improperly used policy language concerning its “Right to Inspect,” and relied on preferred remediation vendors even when independent testing suggested substantially greater work was required. CDI’s examination reportedly found a particularly high number of violations among the smoke and ash claims it reviewed.
The additional living expense allegations also deserve attention. The whole purpose of ALE coverage is to allow people to maintain something resembling their normal lives while their homes cannot be occupied. The County alleges delayed or inadequate payments, unstable short-term housing arrangements, confusion about when coverage would end, and situations in which policyholders exhausted savings or incurred debt while substantial insurance benefits allegedly remained available.
The complaint also contends that some claims began moving only after policyholders complained to regulators, contacted the press, went to the EPA, or reached State Farm’s executive offices. The County argues that this pattern suggests the delay was not always caused by legitimate investigation, because State Farm demonstrated an ability to resolve the same issues once someone important started asking questions.
The lawyers on the complaint also tell us something about the theory behind the case. Los Angeles County Counsel is working with Consumer Watchdog and Christina Tusan of Tusan Law. Consumer Watchdog has substantial experience with California insurance regulation and State Farm. Tusan is not known as a first-party property insurance lawyer. Instead, she is a longtime consumer protection prosecutor who previously worked for the Federal Trade Commission, the California Attorney General, and the Los Angeles City Attorney, with extensive experience litigating California Unfair Competition Law and False Advertising Law cases.
My view is that this combination of lawyers is not accidental. This lawsuit is taking alleged insurance claims misconduct and asking different questions. What if the same practices are viewed not merely as breaches of individual insurance contracts but as unfair business practices affecting thousands of consumers? What if advertising about being there when disaster strikes becomes part of a false advertising case when the government alleges that the claims operation systematically failed to deliver what the advertising promised?
There is some irony because State Farm itself spent the 2026 Big Game making fun of a fictional competitor called “Halfway There Insurance.” State Farm’s campaign portrayed the imaginary company as the kind of insurer that would not quite deliver when a customer actually needed help. State Farm said the point was to remind consumers that “having insurance isn’t the same as having State Farm.” Los Angeles County is now essentially asking a court whether some wildfire survivors received the Halfway There experience from the company making fun of it.
Oklahoma cannot be ignored. Attorney General Gentner Drummond has separately sued State Farm, alleging that the company’s Hail Focus Initiative used undisclosed claims standards to reduce roof replacement approvals and wind and hail payments. State Farm denies those allegations as well. Yet when allegations of systemic claims practices start appearing in different contexts, involving different catastrophes and different government officials, insurance executives should not simply blame plaintiffs’ lawyers and move along. They should look very hard at their claims culture, incentives, metrics, training, technology, and management expectations.
There is a broader lesson here for the insurance industry. Claims departments cannot be managed solely through financial dashboards. Indemnity dollars are not widgets coming off an assembly line. Every reduction in “severity” represents money that somebody making a claim may believe is necessary to rebuild a home, replace property, remove contamination, or keep a family housed. Good insurance claims management certainly requires efficiency and controls. It also requires remembering why the money is being paid in the first place. What is your claims culture?
Every claims executive in America should study the systemic litigation facing State Farm. Whether all these allegations are eventually proven is another matter. But when regulators, attorneys general, counties, class-action lawyers, and individual policyholders are simultaneously questioning institutional claims practices, there is more at stake than the next lawsuit. There is the promise behind the brand.
I urge readers interested in the details to read Los Angeles County’s complaint for themselves.
Thought For The Day
“You want the real deal? Like a good neighbor, State Farm is there.”
—Jake from State Farm
1 Complaint [filed Aug. 31, 2026], People of the State of California v. State Farm Gen. Ins. Co., No. 26STCV27501 (Cal. Super. Ct. – Los Angeles County).
