2026-09-09 · California · Regulation

California's insurance regulator has moved from describing claims-handling standards to enforcing them, in an action alleging 432 violations arising from the January 2025 Los Angeles wildfires.

The Department of Insurance announced on May 4, 2026 that it had filed an Accusation and Order to Show Cause against State Farm General — the first step toward a public hearing before an administrative law judge.¹

The predicate was a Commissioner-ordered Market Conduct Examination, opened on consumer complaints after the fires.

What the examination found

398 violations across 114 of 220 claims sampled — a majority of the sample — plus 34 further violations arising from consumer complaints. 432 alleged violations in total.

The claims are brought under the Unfair Insurance Claims Practices Act, with penalties available under Insurance Code section 790.035 of up to $5,000 per violation, or $10,000 per willful violation.

The conduct alleged

Investigations delayed past the 15-day requirement. Failure to accept or deny within 40 days. Unreasonably low offers. Repeated adjuster reassignment — what the Department called “adjuster roulette.” Improper denial and misclassification of smoke damage claims, which made up nearly half of the complaints. Failed status communications.

For context on scale: State Farm policyholders filed roughly 11,300 residential claims out of 38,835 total in the fire area.

Why it matters to associations

The allegations are unadjudicated, and it is worth being clear about that — an Accusation is a charging document, not a finding.

What is not in doubt is the standard being enforced. The 15-day investigation and 40-day accept-or-deny clocks are the same regulations that govern a claim on an association's master policy. They are not residential-only, and they do not depend on the size of the loss.

One honest limit: the Department's announcement does not mention condominium, homeowners association, loss-of-use or additional living expense claims specifically. The relevance here is the standard and the enforcement posture, not a finding about association claims.

1. California Department of Insurance, 'California takes legal action against State Farm after investigation finds widespread mishandling of LA wildfire claims' (May 4, 2026) ↩
2. California Department of Insurance, press release 029-2026 (September 1, 2026) — Smoke Damage Recovery Act, AB 1795, and the 30-day inspection requirement ↩
3. AB 1795, California Legislature — bill status (Smoke Damage Recovery Act, enrolled September 4, 2026) ↩
4. Bulletin 2026-6, California Department of Insurance (August 14, 2026) — one-year non-renewal moratorium and affected ZIP codes ↩