By Megan Fan Munce and Susie Neilson, SAN FRANCISCO CHRONICLE
https://www.sfchronicle.com/california/article/state-farm-investigation-los-angeles-21171274.php
After months of consumer complaints and lawsuits over its response to the Los Angeles-area wildfires, State Farm General is now being investigated by the county where the fires took place.
On Thursday, the Office of the Los Angeles County Counsel’s consumer protection division launched a civil investigation probing whether the insurers’ claims practices after the Eaton and Palisades fires may have violated California’s Unfair Competition Law. It comes several months after California’s Department of Insurance launched its own formal investigation into the insurer.
The January fires collectively burned more than 16,000 structures and killed 31 people. As of August, survivors had filed more than 41,000 insurance claims, according to the Department of Insurance.
Assistant County Counsel Scott Kuhn said that after sustained online advocacy and news conferences by wildfire survivors frustrated with their insurers, State Farm stood out.
“We would certainly hope that this is yet another wake-up call for State Farm to do the right thing with their customers and to provide full and fair payments pursuant to the policies as quickly as possible,” he said. “That’s really the goal, is to get resources into the policyholders’ hands so that they can rebuild and reoccupy their homes and get back to their lives.”
The investigation will look into whether State Farm failed to reasonably pay to cover smoke damage claims, withheld key documents from homeowners and refused to pay living expenses to policyholders for the months they were displaced from their damaged or destroyed homes, according to a letter the county sent to the insurer.
State Farm is California’s largest insurer and covered more homes in and around the burn zone than any other insurer, a Chronicle analysis found. As of this month, the company has received more than 13,500 claims and paid more than $5 billion to consumers, according to a spokesperson. The company still has 200 employees on the ground handling claims, she said.
“The goals of this investigation are unclear but what is clear is that it will be another distraction from our ongoing work in California to help our customers recover from this tragedy. State Farm is committed to paying customers what they’re owed,” the spokesperson said in a statement Thursday. “We’re here every step of the way and working with elected officials to build a more sustainable insurance market in California.”
In June, California Insurance Commissioner Ricardo Lara opened up a separate investigation into the company after receiving hundreds of complaints from policyholders alleging the insurer mishandled their claims, including by frequently assigning them new adjusters, keeping inadequate records and handling similar claims in inconsistent ways.
“We have a shared goal: We want people to recover on their own terms. And we want insurance companies to pay claims fairly and quickly,” Lara said in a statement Thursday.
State Farm has said that it would comply with the department’s examination and that a fair review would find thousands of satisfied customers.
Wildfire survivors have accused the department of not acting fast enough. For months, a coalition known as the Eaton Fire Survivors Network has been collecting stories of displaced residents who have faced delays and denials from their insurance companies. In recent weeks, they’ve campaigned for Lara to resign over allegations the commissioner is too entrenched with the industry.
The group’s founder, Joy Chen, said in a statement that she is grateful the county is stepping in.
“In the absence of state leadership, today’s county investigation is a major step forward. It matters not only for Los Angeles fire survivors, but for every Californian who pays premiums and expects the protection they paid for when disaster strikes,” Chen said.
Lara has said that his department is working on an “expedited and thorough” investigation and that it will release its findings publicly as soon as they are ready. Deputy Insurance Commissioner Michael Soller said the department cannot comment on the exact status until the examination is finished.
Both the county and the California Department of Insurance said they will probe similar issues, but the investigations will not be a perfect overlap. The Department of Insurance has authority to investigate and fine insurers over breaches of the state’s insurance code, while the county’s investigation is set to probe potential violations of state laws that more broadly govern business practices.
“The investigation by CDI has been going on for a bit of time, and there’s still a lot of consumer complaints and criticism of the way State Farm is handling things,” Kuhn said. “We think more pressure and additional resources looking at their practices was warranted.”
Private plaintiffs’ attorneys have also filed lawsuits alleging the insurer used faulty algorithms to set policyholders’ coverage limits, leaving them drastically underinsured when their homes burned down and unable to rebuild with the insurance payouts they received. State Farm and other insurers have maintained that homeowners, not their insurance companies, are responsible for making sure they’re fully covered in the event of a catastrophe.
A recent survey of more than 2,000 residents commissioned by advocacy group the Department of Angels found that, of all major insurers with policyholders affected by the fires, State Farm had among the lowest satisfaction rate, with just one-third of policyholders saying they were “very” or “somewhat” satisfied with how the insurer handled their claim, and more than half saying they were dissatisfied.
The only provider with lower satisfaction ratings according to the survey was the California FAIR Plan, the state’s insurer of last resort, which has also been inundated with complaints from policyholders who say it is illegally denying valid claims for smoke contamination. The FAIR Plan has said that its policies comply with state law and that it is “focused on helping our customers recover and rebuild.”
“Many wildfire survivors have been waiting for nearly a year for help that hasn’t come,” Carmen Balber, executive director of the consumer advocacy group Consumer Watchdog, said in a statement. “We’ve received voluminous complaints from consumers that their insurers — including State Farm — have delayed, tried to underpay, or outright denied their claims. The county’s investigation finally gives fire victims a chance at real accountability and relief.”
The county’s letter to State Farm requests a reply by next Thursday, citing the urgency of delivering answers to residents who are being actively displaced.
“Time is of the essence,” Kuhn said.