In the aftermath of the Eaton fire, Amy Harrity and her husband were stunned to discover that their Altadena home of three years was still standing, even as dozens of houses in their neighborhood burned to the ground.
The fierce firestorm cracked a window of the three-bedroom ranch house, carrying in debris, soot and ash, which also accumulated at the base of doors and other windows; but that was little, they figured, compared with the loss many neighbors endured.
“The immediate response was that we were blessed and what did we do to deserve this. And then we quickly realized that it’s sort of its own unique version of grief in hell, if you want to call it that,” said Harrity, who is living with her family temporarily in the San Francisco Bay Area.
The 40-year-old mother of two young children blames the family’s troubles on its insurer, State Farm General, which she has wrangled with for months over the remediation needed to make the Navarro Avenue home livable again — with little progress to show for it.
The family had to pay $7,000 to board up the home and do hygienic testing, which came back positive for lead and asbestos. State Farm has offered to pay only about half of the $102,000 that its own contractor estimated it would cost to thoroughly clean the house, Harrity said.
“So what you would find in our house is that nothing has been done,” she said. “If you entered, you would still see the school lunches I was making in the kitchen the night we evacuated.”
Six months after the Jan. 7 firestorms that killed at least 29 people and destroyed more than 16,000 structures, frustrations are mounting among many homeowners over how the state’s largest insurer is handling their damage claims.
Harrity and hundreds of other policyholders in the Eaton and Palisades fire zones relayed their complaints about their dealings with State Farm to the California Department of Insurance, calling for an investigation.
The homeowners complained anonymously of being shuffled to multiple inexperienced adjusters, feeling “ghosted” by unanswered calls and emails, being refused tests for toxins and getting inadequate offers to fix their damaged homes — all of which took a huge emotional toll, according to a Times review of the complaints.
“Throughout this entire process State Farm has been like a black hole where hope and fairness go to die,” one testimonial said. “They have misrepresented what is and is not covered under our policy, ignored our hygienist report that shows concerning levels of asbestos, and given us lowball offers that in no way are a good-faith effort to settle our claims.”
Last month, Insurance Commissioner Ricardo Lara announced that in response to complaints, regulators would start a “market conduct examination” focusing on State Farm’s handling of smoke damage and other claims, which the insurer said totaled about 13,000 with $4.2 billion paid out as of June 30.
The investigation adds to the pressure on State Farm, which is facing multiple lawsuits related to the fires, including one filed last month by fire victims who accused the company of leaving them deliberately underinsured. State Farm denies any wrongdoing.
State Farm spokesperson Bob Devereux said the insurer is seeking to resolve all claims issues and empathizes “with those who are rebuilding their lives.”
“With an event of this magnitude, we are still actively working with customers,” Devereux said. “We have teams on the ground and anyone with a question or a concern should reach out to us. We evaluate each claim, including smoke claims, on a case-by-case basis. We’re committed to providing every customer all the benefits they have available through their policy.”
Such assurances, however, have done little to mollify policyholders.
The activist group Eaton Fire Survivors Network will hold a news conference Monday morning to press state officials on their demands, which include holding the line on premium rate hikes after several were approved for the insurer in May.
“We urge Commissioner Lara and Gov. [Gavin] Newsom to expedite the investigation, release the findings and ensure full payment to our families before any further rate hikes are considered,” said Joy Chen, leader of the network, whose Altadena home was damaged but is not insured by State Farm.
State Farm General estimates that it will ultimately pay out some $7.6 billion to settle its Jan. 7 fire claims, but said reinsurance largely provided by its Bloomington, Ill., parent company, State Farm Mutual Automobile Insurance Co., will cover all but about $600 million of that.
After the fires, it sought a 22% emergency rate hike for its homeowners policies that it later trimmed to 17%, which was approved by Lara, in addition to increases in other property policies.
His decision came despite pleas by fire victims and consumer advocates to reject the request, but it was recommended by an administrative law judge who found that the insurer was in a weak financial state even before the fires.
In approving the rate hike, Lara said it was predicated on State Farm providing “the highest level of service to its California customers and to fulfill its promises,” but he has rejected efforts to link the rate hike to State Farm’s claims management, saying they are legally separate matters.
Another rate hearing is set for October, as State Farm pursues a premium increase that it first filed for in June 2024. That increase could total 30% for homeowners, including what the insurer was already awarded this year on an emergency basis. The company also is seeking rate hikes for other property policies.
“The rate request we’ve submitted is a critical step to restoring the financial strength of State Farm General. Financial strength is necessary so an insurance company can pay for any future claims for the risks it insures,” Devereux said.
Big exposure
State Farm built up its market share before it suddenly started shedding policyholders a few years ago after a series of catastrophic wildfires up and down the state. In 2023, it announced that it would stop writing new homeowners policies, and last year it said it would not renew some 72,000 property policies, including 30,000 for homeowners.
Still, by the time the fires broke out, it had some 250,000 residential policyholders in Los Angeles County, and roughly 1,100 in Pacific Palisades’ primary 90272 ZIP Code alone.
Its $7.6-billion financial exposure estimate is well above other insurers. Allstate has pegged its exposure at roughly $2.4 billion.
This is not the first time State Farm has been subjected to a market conduct exam, which the department carries out to ensure carriers are following the law in setting rates, making underwriting decisions on whom to insure, and handling claims in a fair and timely manner.
The exams are conducted by taking a random sample of all claims, which are subjected to analysis. The size of the sample has not yet been decided, which will happen after regulators receive a spreadsheet of all State Farm claims, both closed and open, said Tony Cignarale, deputy commissioner of the department’s Consumer Services and Market Conduct Branch.
“We’re going to be looking at what procedures the company has written down and has in place on the front end, as well as how they apply those procedures, as well as whether those procedures are reasonable or not based on current law or what general business practices are today,” said Cignarale, also is the chair of a new smoke claims task force set up by Lara to establish standards for testing and remediation.
Devereux said State Farm “will continue cooperating fully with the [department’s] market conduct exam and helping our customers. A fair review will find that thousands of State Farm customers are being helped by our teams on the ground in Los Angeles County and are very satisfied,” he said.
Some consumer advocates, however, are skeptical much will come of the state examination.
Among them is Harvey Rosenfield, the author of Proposition 103, the 1988 measure that established the state’s insurance regulation regime, including an elected commissioner with authority over rates.
“The vast majority of market conduct exams result in nothing but a report that they don’t even have to release,” said Rosenfield, founder of Consumer Watchdog, a leading insurance advocacy group based in Los Angeles.
Department officials disputed the claim and said the State Farm report would be released publicly.
State Farm was subject to a market conduct examination released in 2022 regarding replacement cost estimates and coverage limits of for Northern California policyholders who suffered total losses in a series of 2015 and 2017 wildfires.
The exam alleged that a “significant number” of dwellings were left underinsured, citing State Farm’s failure to periodically review the properties. Though the insurer agreed to provide additional agent training, it disputed most of the findings, arguing that it was the responsibility of policyholders to set and update their coverage.
That same year, the department completed a market conduct exam of the California FAIR Plan Assn., the state’s insurer of last resort, which found its smoke-damage policy violated state law. The department threatened to take administrative action but did not so. The policy was struck down last month by a Los Angeles County judge.
Michael Soller, a spokesperson for Lara, said that even if the reports don’t result in immediate policy changes, they are “one of the department’s strongest consumer protection tools” and “build the record” for legal action.
The department ultimately returned more than $158 million to policyholders after the 2015 and 2017 wildfires, he said, adding that the FAIR Plan report “is informing our current investigation of its handling of smoke damage claims,” including demands to change the policy.
Controversial rate increases
Despite Lara’s continued assertion that he cannot halt the rate-increase proceedings, fire survivors are pushing back and demanding that the governor intervene.
However, a spokesperson for the governor rejected the idea that Newsom would seek to halt the rate proceedings.
“The Department of Insurance, which is constitutionally independent from our office, has the authority over rate review proceedings. We have full confidence in Insurance Commissioner Ricardo Lara’s commitment to thoroughly investigate concerns and hold any bad actors accountable,” sthe spokesperson said.
Rosenfield believes that Lara has the authority to halt the rate increase proceeding, pending resolution of the claims issues. In writing Proposition 103, the attorney said, he inserted a clause that requires insurers to not to be in violation of unfair business practice laws, which include the mishandling of claims.
“The voters’ intent was to leverage insurance companies need for approval of a rate increase to ensure compliance with the rest of the law,” he said, acknowledging such an application of Proposition 103 has never been adjudicated in a court.
Cignarale said the department doesn’t agree “with his opinion” but would look at any legal arguments he presented to it.
Rep. John Garamendi (D-Walnut Grove) a harsh Lara critic who served two terms as insurance commissioner, said he believes Lara has the authority to halt additional hikes.
“My experience would tell me there will be no rate increase period until the claims issues are fully settled, until every survivor, every claimant … is going to be paid the full benefit of their policy,” he said last month in a speech at a fundraiser for Consumer Watchdog in Beverly Hills.