Following a judge's ruling, State Farm customers in California are one step away from paying more on their insurance to alleviate the company's "dire" financial situation after the Los Angeles fires.
The decision, which Insurance Commissioner Ricardo Lara accepted, grants the company a $400 million cash infusion from its parent company and outlines a 17% increase for homeowners policies, lower than State Farm's initial proposal of 21.8%. According to the California Department of Insurance, the judge believed that State Farm had evidence of "extraordinary financial distress."
The increases will go into effect on June 1, following another hearing with a neutral judge.
"State Farm must now justify its financial condition and detail its recovery plan in a full rate hearing before a neutral judge and my Department's experts," Lara said in a statement.
The insurance giant submitted its emergency rate increase request following the destructive Los Angeles wildfires, including the Eaton and Palisades fires — the second and third-most destructive fires in California history, which destroyed a combined 16,248 buildings and damaged thousands more.
Following the request, State Farm faced backlash from Eaton Fire survivors over apparent insurance payment delays. State Senator Sasha Renée Pérez, who represents the burn scar residents, asked for the state to delay the decision until an expedited investigation into the complaints in April.
"The decision to grant State Farm's unprecedented request for an emergency rate increase disregards the hardships faced by fire victims and their calls for accountability," said Pérez.
Lara, who has also faced backlash over the request, assured residents that he weighed the options before adopting the decision.
"I am focused on ensuring that State Farm pays its claims to wildfire survivors fully and fairly – and nothing is off the table," Lara said. "I am balancing all the facts. Protecting all State Farm customers and the integrity of our insurance market is an urgent matter. Let me be clear: We are in a statewide insurance crisis affecting millions of Californians. Taking this on requires tough decisions. This is not a game."
The company also agreed to "refrain from implementing new block non-renewal programs through the end of 2025," according to the California Department of Insurance.
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