LA County sues State Farm over fire insurance payouts Play

State Farm Insurance is being sued by L.A. County for ripping off fire victims, for failing to pay out fire insurance settlements that it had promised. Failing to clean up smoke damage is the major, egregious violation of state law according to the lawsuit. And State Farm has created public nuisances in Malibu, Pacific Palisades, and Altadena, by preventing people from rebuilding by holding on to their money. That causes a proliferation of vacant lots.

The insurance company is the biggest fire insurance company in California, with 20 percent of the residential market. More than 500 complaints have been filed with the county against State Farm.

Joy Chen is the executive director of Every Fire Survivors Network. They've been tracking all of the fire insurance companies to see how they've been performing paying out claims after the massive Palisades fire and the Eaton fire. On the same day, State Farm quickly emerged as being the worst of the worst. "We started collecting data. We brought it forward to our state insurance commissioner, Ricardo Lara, and the misconduct seemed to continue unabated."

The major issue with State Farm is their failure to pay for coverage for smoke damage on structures that didn't burn. The lawsuit claims State Farm broke California's business practices law, engaged in deceptive marketing, and created public nuisances — those hundreds of empty lots.

L.A. County Supervisor Lindsey Horvath represents Malibu and the Pacific Palisades. She says she's fed up trying to convince State Farm to be fair and follow the law. "We tried this the nice way, but LA County isn't afraid to do this the hard way if it brings justice to our survivors. Today's lawsuit alleges that State Farm made an already painful recovery harder through delays, underpayments, denials, and barriers that kept policyholders from getting what they are owed."

State Farm strongly defends itself. It says its focus remains on helping customers to recover. The State Department of Insurance disagrees. They've already filed a similar lawsuit against State Farm, but that state lawsuit cannot sue to recover restitution. The county lawsuit is aimed at getting restitution for the people who were defrauded.

Deputy County Counsel Scott Kuhn says the lawsuit will prove State Farm is repeatedly violating the law. "State Farm's response was they were proud of their response to the policyholders. That's not acceptable. They should be ashamed, not proud, of their actions here."

Joy Chen from Every Fire Survivors Network says whether a family was starting to recover or not depended largely on which insurance carrier they were with. "And this was a huge shock, because we all had been faithfully paying our premiums for 20, 30 years, but only some of us seem to be getting the benefits that we have paid for."