California lawmakers are pressing the state Department of Insurance (CDI) to take immediate steps regarding State Farm General Insurance Co., including expediting a market conduct examination and pausing rate increases until the review is finished.
Assemblymember John Harabedian (pictured above), a Democrat representing Pasadena, called for the CDI to complete its examination of State Farm’s claims handling practices within 60 days and to make the findings public.
The request follows the CDI’s announcement in June that it was investigating State Farm’s response to claims arising from the Los Angeles wildfires. Consumer groups have alleged that the insurer engaged in low-balling, slow-walking, and denying claims.
The CDI’s investigation is focusing on several patterns in State Farm’s wildfire claims handling, including frequent reassignment of adjusters, inconsistent management of similar claims, and inadequate record-keeping or information-sharing among claims teams.
State Farm’s current request to increase homeowners’ rates by 15% to 38% has received preliminary approval. This follows a 17% rate increase that was approved in April.
Harabedian said, “If they receive this second rate hike come October, that'll bring their total rate increases to 33%. And that's simply unacceptable. I don't know anybody whose wages have increased 33% over the last year or even over the last five years, to be perfectly honest with you.”
An administrative law judge recently denied a joint effort by the CDI and State Farm to conduct prehearing matters in private, instead requiring the insurer to disclose its expert witnesses and granting an investor’s request for discovery.
The judge also rejected the CDI’s attempt to delay consideration of State Farm’s wildfire claims practices until after the rate ruling. Consumer Watchdog, a consumer advocacy group, argued that claims handling is integral to ratemaking and should not be separated from the rate hearing.
Administrative Judge Karl Seligman agreed, stating that splitting the hearings could “easily result in chaos and challenges as to appropriateness on numerous grounds that would only operate to cause delay.”
The CDI expressed support for the ruling, noting that California Proposition 103 requires transparency and accountability in the ratemaking process.
As of June 12, State Farm General had received more than 12,870 claims related to the Los Angeles wildfires, paying out over $4.03 billion, with approximately 2,500 policyholders experiencing total losses.
The CDI has a track record of intervening for policyholders, having recovered more than $40 million for those affected by the Eaton and Palisades fires through formal consumer complaints. This recovery represents a portion of the broader $17 billion in residential and commercial lines claims paid out through May 12 for the same event.
Lawmakers are also urging the CDI to ensure the state’s Fair Plan covers smoke damage and to require greater transparency in loss estimates and the complaint process. Insurance Commissioner Ricardo Lara said the department’s goal is for wildfire survivors to recover on their own terms.
“The severity of our insurance crisis and the suffering of countless Californians require us to get this right. We must empower our department's experts to do their jobs to protect consumers, and that is my intention,” Lara said.
The investigation into State Farm’s claims handling, the formation of a Smoke Claims Task Force, and legal action against the Fair Plan for its handling of smoke claims are among the CDI’s current efforts to address the state’s insurance challenges.
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