State Farm Under Investigation Over $5B in California Wildfire Claims

State Farm is facing dual investigations from Los Angeles County and the California Department of Insurance over how it managed thousands of wildfire claims tied to the Easton and Palisades fires earlier this year. With over $5 billion paid out and more than 12,000 claims filed, regulators are questioning the insurer’s use of adjusters, artificial intelligence tools, and internal procedures in managing claims for widespread smoke and fire damage.

Adjusters may find key implications in allegations of underpayments, delayed settlements, and inconsistent file handling, particularly where AI may have influenced outcomes. Los Angeles County’s demand for claims data, internal metrics, and training protocols could result in heightened transparency and future regulatory standards. Meanwhile, the state’s own probe focuses on claim reassignment frequency, record-keeping gaps, and unequal treatment among policyholders.

These investigations spotlight the increasing pressure on insurers to balance speed, accuracy, and fairness in disaster recovery efforts—especially under public scrutiny and legal oversight. Claims professionals should pay close attention to potential shifts in regulatory expectations and documentation standards for catastrophe events, especially in high-exposure regions like California.