Fire Victims Sue State Farm Over ‘Grossly Underinsured’ Homes

Six couples and one individual who lost their homes in the devastating Los Angeles fires filed a lawsuit Monday against State Farm, alleging the insurance giant deliberately left them “grossly underinsured.”

The lawsuit, filed in Los Angeles County Superior Court, targets State Farm General Insurance Company, claiming it systematically underestimated rebuilding costs to maximize profits while leaving fire victims without adequate resources to rebuild.

“State Farm, California’s largest home insurer, has engaged in a ‘multi-faceted illegal scheme’ that is designed to ‘reap enormous illicit profits by deceptively misleading over a million homeowners in California,'” the complaint alleges, according to The Spokesman-Review.

The lawsuit represents seven households from three communities devastated by the Palisades and Eaton fires: four from Altadena, two from Pacific Palisades and one from Sierra Madre, according to Yahoo News.

Some homeowners were underinsured by more than $2 million when their properties were destroyed, according to the suit.

In one striking example detailed in the lawsuit, homeowners reportedly contacted their State Farm agent before the January fires to confirm whether their dwelling limit of just over $1 million would cover rebuilding their Altadena home, according to The Spokesman-Review. The agent allegedly assured them the amount was sufficient. After the fire destroyed their property, rebuilding estimates exceeded $3 million.

The legal action comes days after California Insurance Commissioner Ricardo Lara launched a formal investigation into State Farm’s handling of thousands of wildfire claims.

“Californians deserve fair and comprehensive treatment from their insurance companies,” Lara said in a June 12 press release from the California Department of Insurance. “No one should be left in uncertainty, forced to fight for what they are owed, or face endless delays that often lead consumers to give up.”

Smoke damage claims have emerged as a particular concern. “State Farm is unjustly denying legitimate smoke damage claims, forcing families already harmed by the Eaton and Palisades fires to make the impossible choice of living in toxic homes or paying tens of thousands out of pocket for remediation,” said Kiley Grombacher, co-founder of the California Fire Victims Law Center, according to ABC7 Los Angeles.

State Farm, which serves about 1 million California homeowners, has received over 12,870 fire-related claims and paid more than $4.03 billion to customers, according to company statements.

State Farm spokesperson Sevag Sarkissian told CalMatters that “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.”