Los Angeles County is suing State Farm, alleging that California’s largest private insurer of homes has misrepresented policyholders’ coverage and how it handles claims regarding the devastating Eaton and Palisades fires. The county alleged that the insurer has played a role in the “continued contamination of homes and neighborhoods with toxic substances.”
Los Angeles County Office of the County Counsel said that State Farm has violated California’s unfair competition and false advertising laws in dealing with claims from Eaton and Palisades survivors, describing several of the insurer’s actions as unfair or unlawful.
That includes State Farm reassigning adjusters, “delayed investigating and processing payments; underpaid claims; failed to issue
payments for additional living expenses; re-worked prior estimates to lower payouts; and refused to properly handle smoke damage claims.”
“State Farm General strongly disagrees with Los Angeles County’s characterization of our wildfire claims response,” the insurance company said in an emailed statement to the USA TODAY Network. “We will review the lawsuit and respond through the appropriate legal process. Wildfire survivors deserve support, clear answers, and a fair claims process.”
In January 2025, the Eaton and Palisades fire scorched tens of thousands of acres in Southern California, leaving residents to deal with the process of rebuilding their destroyed homes or cleaning their still-standing residence damaged by smoke and other contaminants. State Farm policyholders filed about 11,300 residential claims related to the wildfires, which is nearly a third of the claims filed across all insurers, according to the California Department of Insurance.
The insurer said it has paid more than $6.2 billion on claims related to the fires, including for smoke-related damage, and “has closed about 78% of claims.”
But Eaton and Palisades fire survivors and organizations advocating on their behalf have long criticized insurers’ handling of claims.
"Wildfire survivors have already endured unimaginable loss; they should not have to fight their insurance company simply to receive the benefits they paid for and counted on,” said Los Angeles County Supervisor Kathryn Barger in a statement. “These delays, underpayments, and denials have real consequences. They keep families from rebuilding, prolong displacement, and ultimately slow the recovery of entire communities.”
Lawsuit calls for State Farm to fund testing, remediation for homes
Los Angeles County counsel is suing on behalf of Californians and is calling for State Farm to abate a "public nuisance," one the insurer is alleged to have played a role in. That’s in part due to their handling of homes requiring cleaning due to smoke and other contaminants caused by the fires.
“State Farm suppressed the testing needed to identify contaminants; refused to pay for remediation scoped to actual contamination; steered remediation to preferred vendors whose cleaning protocols were not designed to abate lead and asbestos contamination; and pressured families, including families with young children, to reoccupy homes that had not been adequately tested, let alone remediated,” according to a court document.
At minimum, abatement requires State Farm to “promptly fund the environmental testing and qualified remediation” for properties and pay policyholders the money they’re entitled to so that they can rebuild and remediate their homes, the court filing said.
Earlier this year, the California Department of Insurance found nearly 400 violations of state law in a sample of 114 claims, including that State Farm “failed to provide required written denials for hygienist and environmental testing, misclassified testing costs, and misrepresented policy provisions related to inspections.”
“Insurance practices in California are regulated by the California Department of Insurance, and State Farm cooperated fully with the Department’s review of our wildfire claims response,” State Farm said.
Underpayments, issues with additional living expense coverage
The lawsuit claims State Farm has made a number of misrepresentations, including that policyholders’ claims would be handled promptly; that it would pay policyholders for covered losses as quickly as possible; that it would pay for losses caused by fire and smoke; and that those impacted by the fires would receive clear communication. Plaintiffs are turning to the court to block State Farm from continuing what they say are “false and misleading advertising practices.”
State Farm is alleged to have “engaged in systematic underpayments to policyholders.” For example, the gap between State Farm’s replacement cost for a Pacific Palisades total-loss and its estimated rebuild cost was $607,045. In another instance, additional living expense checks were reportedly $500 to $1,500 below the costs submitted each payment cycle.
Additional living expense coverage covers the costs a person faces when they can’t live safely at their home, including because of a wildfire, such as a hotel or food, according to the California Department of Insurance.
The lawsuit claimed State Farm violated state code over its practices toward additional living expense coverage, including by misrepresenting the terms of such coverage and by paying late. One policyholder reportedly had moved to different temporary housing nine times since the fire because State Farm refused to authorize an Airbnb or other rental for a full month.
State Farm said its focus remains on helping customers recover and that the insurer will continue to work with customers whose claims remain open, evaluating “each claim based on the facts of the loss and the coverage provided by the customer’s policy.”
What LA County says is next
State Farm will need to file a legal response within 30 days, according to Los Angeles County's counsel.
The office of the county counsel said it’s investigating other insurance companies “but hopes this lawsuit sends a message to other companies to take quick action to help their policyholders receive payments and resources so they can return home and rebuild their lives and communities.”
Paris Barraza is a reporter covering Los Angeles and Southern California for the USA TODAY Network. Reach her at pbarraza@usatodayco.com.
This article originally appeared on USA TODAY: State Farm misrepresented coverage, claims, LA County lawsuit alleges
