As the largest insurance company in America, State Farm sells tens of millions of policies to consumers, marketing itself as a friendly, helpful company that will make your life easier if disaster strikes. Its famous slogan “Like a good neighbor, State Farm is there” is omnipresent in television advertising. But the reality is quite different. New evidence reveals a nasty side to this neighbor, with the company burying customers in red tape, unfairly delaying or denying insurance claims after natural disasters, and offering people insultingly low payouts.

A recent investigation by the California Department of Insurance shows just how appalling State Farm’s behavior really is. California conducted an in-depth analysis, known as a market conduct examination, of the company in the wake of numerous complaints made after the 2025 Los Angeles wildfires. The wildfires destroyed over 16,000 homes, devastating the Pacific Palisades community and large parts of Altadena, and thousands more homes were partially damaged, many contaminated by toxic smoke. After these wildfires, consumers filed 38,835 claims, 11,300 of them with State Farm.

The Department of Insurance looked at a sample of 220 State Farm claims and found 398 violations of state law in 114 of those claims.  On average, State Farm broke state law every other time a claim was filed and, in each of those claims, they violated the law more than three times on average.

State Farm broke the law at all stages of the claims process: by failing to investigate claims within 15 days, by failing to accept or deny claims within 40 days, and by failing to pay accepted claims or provide written notice of the need for additional time within 30 days. The company failed to quickly assign adjusters to evaluate the damage to consumers’ homes and often reassigned adjusters, causing serious confusion and frustration. State Farm further misclassified costs for testing for smoke damage, misrepresented policy provisions, and didn’t provide the required written denials when it denied smoke damage claims.

State Farm was often unresponsive and stingy. State Farm failed to respond to consumers, failed to send letters updating them on their status, and failed to provide notice when additional time was needed to determine these claims. Finally, State Farm made unreasonably low settlement offers to policyholders, meaning that they would not get the funds their insurance contract promised and, as a result, would not have enough to repair or rebuild their homes.

In response to these findings, the California Department of Insurance has taken legal action against State Farm, meaning there will be a public hearing before an administrative law judge. And after the hearing, the Insurance Commissioner can impose penalties against the company, up to $5,000 per violation or $10,000 for willful violations (which are very difficult to prove). The Department announced, in what is the most disappointing aspect of the regulator’s announcement about its enforcement action, that it is seeking about $2 million in fines against State Farm.

As Carmen Balber, Executive Director of Consumer Watchdog, pointed out, “Two million dollars is about how much it would cost to repair two of the homes in California. If State Farm broke the law in half of its claims, $2 million falls far short of holding it accountable.” A $2 million fine would be a trivial cost of doing business for this company, which grew its surplus by $25 billion last year alone, to $170 billion. Extrapolating from this investigation, and assuming that, with this level of consistent misbehavior, the Insurance Department can show that the unlawful lowballing, delays, and denials of claims were willful, a $200 million fine would be warranted in order to hold State Farm accountable.

However, there is an even stronger measure that California could take, which Commissioner Lara contemplates in his action against State Farm: California could suspend State Farm’s license—meaning that it could not sell new insurance policies in the entire state. This would be a major decision that would affect many consumers, but it would definitely get the company’s and industry’s attention. Such a drastic measure might be what is needed to ensure State Farm treats consumers fairly in the future and that insurance companies take their responsibilities to consumers seriously.