In a move aimed at policyholder protection amid California’s wildfires, Insurance Commissioner Ricardo Lara has initiated a formal Market Conduct Examination into State Farm General Insurance Company. This in-depth regulatory investigation is a direct response to troubling complaints from wildfire survivors about how their property insurance claims have been handled following the devastating Palisades and Eaton fires.
Commissioner Lara emphasized that Californians deserve fair and comprehensive treatment from their insurance companies. He noted that no one should be left with uncertainty, forced to fight for what they are owed, or face endless delays. With climate-driven wildfires becoming more destructive and commonplace, he stressed the need for insurers to uphold strong, consistent claims handling standards. National guidelines often prove vague or inconsistently applied during large-scale disasters, prompting the Department to examine whether State Farm’s practices meet California’s stringent consumer protection laws.
This recent action is not an isolated effort but part of a broader and consistent regulatory posture that Commissioner Lara has demonstrated since taking office. During the height of the COVID-19 pandemic, Lara reminded insurers of their obligations to conduct full and fair investigations and to promptly pay valid claims, particularly in the context of business interruption insurance. As Derek Chaiken noted in a 2020 article, Insurance Commissioner Provides a Quick Reminder to Insurance Companies of Their Obligations to Fairly Investigate All Business Interruption Claims Caused by COVID-19, Lara issued a clear directive requiring insurance companies to properly investigate all business interruption claims related to COVID-19, reinforcing the principles of fair dealing and prompt resolution that underpin California’s insurance regulatory framework. While many of those claims were properly denied, Lara has a history of demanding full investigations. This recent action is not new.
A Market Conduct Examination is one of the most powerful tools available to insurance regulators. It entails a thorough review of an insurer’s business practices, focusing on how claims are processed, how communications with policyholders are handled, how adjusters are assigned, and how records are maintained. Unlike general audits or routine oversight, this examination targets specific consumer protection concerns that have been identified through formal complaints. The process is expected to take several months, providing regulators with an opportunity to gather evidence and, if necessary, demand corrective actions or impose penalties.
Commissioner Lara identified several problematic patterns that have surfaced in consumer reports and that his office intends to investigate in detail. One common complaint involves the frequent reassignment of claims to multiple adjusters, resulting in confusion, inconsistent communication, and a lack of continuity. Other concerns include the inconsistent handling of similar claims, which raises questions about equity and fairness, and inadequate record-keeping or communication among claims teams, which often leads to delays and stress for policyholders.
Smoke damage has emerged as an especially troubling area in the wake of these wildfires. The urban nature of these fires has created new challenges for insurers in evaluating and remediating smoke-related damage. Unfortunately, homeowners have experienced inconsistent treatment, unclear standards, and protracted disputes over what their insurance policies should cover. Commissioner Lara has already taken proactive steps to address this problem. As detailed in Will California’s Smoke Claims Task Force Actually Protect Homeowners?
Lara launched the Smoke Claims & Remediation Task Force to tackle the lack of standards and accountability in how insurers manage smoke and soot claims. The task force includes public health experts, remediation professionals, and consumer advocates, all working to establish fair, science-based standards to bring consistency and equity to this rapidly evolving challenge.
A particularly important message from Commissioner Lara is that consumer action matters. While his office has received general allegations from wildfire survivor groups, formal complaints are required in order to take regulatory action.
Lara urged all wildfire survivors facing challenges with their insurance claims, whether related to delayed payments, confusing communications, smoke damage disputes, or other issues, to file formal complaints with the California Department of Insurance. These complaints not only help the individual policyholder but also serve as the foundation for systemic accountability and reform. Complaints can be submitted through the Department’s website or by calling its consumer hotline.
The Department’s intervention has already made a meaningful difference. Since January, it has recovered more than $40 million for survivors of the Eaton and Palisades fires through formal complaint processes. Insurance companies have paid out nearly $17 billion to residential and commercial policyholders affected by these fires as of mid-May 2025. However, Commissioner Lara made it clear that these figures alone do not tell the full story. Many survivors still face unresolved issues, and continued oversight is necessary to ensure a fair recovery.
This examination is part of a broader push by Commissioner Lara to modernize California’s insurance system in response to climate-intensified disasters. From expanding consumer coverage options to holding companies accountable for their conduct, the Commissioner has signaled that reform is necessary and urgent. He stated that Californians deserve to return to homes that are truly safe. They should not be forced to handle smoke, soot, and ash on their own. The goal is to close the protection gap and ensure insurance works as it should when disaster strikes.
The investigation into State Farm’s handling of wildfire claims highlights the importance of quick accountability, transparency, and a regulatory system willing to evolve in the face of growing complaints from its citizenry. The voices of wildfire survivors will play a central role in this effort, and those voices are needed now more than ever.
Thought For The Day
“Justice consists not in being neutral between right and wrong, but in finding out the right and upholding it, wherever found, against the wrong.”
—Theodore Roosevelt
