Part 176: The Eaton Fire Fallout – Market Conduct Examinations and Community Rebuilding

Published June 13, 2025. Updated June 24, 2025.

Jun 14, 2025

Photo of contractors removing debris from a burned lot in Altadena, California on March 21, 2025 following the destructive Eaton Fire by author (GoPro Hero 11 Black).

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By Zachary Ellison, Independent Journalist

The announcement left the spokesperson for State Farm Insurance questioning whether there would be “a fair review” of the payouts made by one of California’s most powerful insurers in the wake of the devastating wildfires that struck on January 7, 2025. The Eaton Fire wasn’t the first fire to start that day, with the Palisades Fire preceding it, striking with devastating furor. Yet the organization and advocacy of a determined group of Altadenans may have succeeded in applying enough pressure to force the hand of California Insurance Commissioner Ricardo Lara to launch a market conduct examination into its handling of claims from wildfire victims.

Less than inspiring numbers suggested an underpayment in progress, with journalist Laurence Darmiento of the Los Angeles Times noting that the insurer had paid out $3.96 billion on an estimated cost of $7.6 billion, with “reinsurance payments” reducing the firm’s overall loss to only $612 million. Business is good if you’re selling a necessary product in a market that, by almost everyone’s agreement, is under duress. Charged with ensuring the availability of insurance, Lara has been increasingly under criticism over his cozy industry relationships and fundraising to save a political career increasingly looking to be approaching a certain end.

The press release was reassuring, if not totally satisfactory, with Lara stating, “Our goal is to close the protection gap and make sure insurance works the way it is supposed to, especially in the face of climate-intensified disasters.” Eaton Fire Survivors Network organizer Joy Chen shared the news with pride on the group’s Discord server, headlining “Eaton Fire Survivors: You are Heroes” even as she questioned whether the insurer should receive a 17% rate hike before meeting its obligations. Chen is a former Deputy Mayor in Los Angeles under the late Jim Hahn.

Chen has found that homeowners are receiving only a fraction of the funding needed to rebuild, as low as $300 per square foot when the cost to rebuild is $900 per square foot. This is the fourth time in a decade that State Farm will be subject to a market conduct examination, but the first targeted investigation into their firm’s operations.

In the months since the disaster of January 7, the human impact has faded even as the threats have become clearer. Economic flight from the disaster zone, toxic risk exposures from those remaining even outside the immediate disaster boundaries, and fading public memory of a place, Altadena, that had been beloved for so many decades. Survivors are naturally left with a degree of frustration from the situation.

The toll on the Palisades had been devastating, but Altadena was a place not just of homes but of a human history that in many ways had expressed itself in its buildings rich with character in a way that its loss was signified by the lead and heavy metal particles that its old buildings discharged as they incinerated. Even as Pasadena, largely downwind from the worst destruction, had reopened its schools, the unsurprising discovery that immediate remediation efforts hadn’t mitigated the threat was alarming. 11 of its 23 schools still exceeded the California state levels.

The case for neighborhoods adjoining the disaster zone was even more hazy as volunteer testing became available. There were no guarantees of participation, and undoubtedly homeowners, for whatever reason, whether cultural, economic, or ideological, will fail to remediate their properties. Will the legacy of a single night be not just the loss of a historic community but the jeopardization of its future generation? Those with total losses have been the focus of charity efforts that have poured hundreds of millions of dollars into relief efforts even as life for so many has moved on. I had evacuated that night, like so many others, into the unknown, and chose not to return to a place I had grown up facing so many challenges.

That doesn’t mean I didn’t care. Watching the news of people moving into trailers in front of their burned lots awaiting reconstruction, you had to wonder how long it will take for Altadena to return to community. Years are likely to go by, leaving those trapped in the insurance system and without adequate wealth with a painful decision of whether to stay or go. Despite cries not to sell Altadena, many have had to give up. Times journalist Jack Flemming reported that 145 burned lots had already sold, with another 100 listed. The rate outpaced the Palisades, where 60 scorched parcels had sold plus another 180 “sitting on the market, sometimes for months.” Developers were the primary purchasers, but it wasn’t clear if there was great land continuity.

Profitable development so often has depended on the consolidation of land into large-scale developments, so many of which line the mountains and plains of Southern California in a cookie-cutter fashion. Custom home development requires greater design costs and permitting. Replicating and regenerating a place like Altadena and the Palisades day-by-day seems further away with the calendar passing, 157 days past disaster, but what for so many people feels like a lifetime.

The median sale price in Altadena in a year dropped from $1.25 million to $675,000, according to journalist Snejana Farberov of Realtor.com writing about the land rush that “Lured by the rare opportunity to purchase flat parcels of land just a short driving distance from downtown Los Angeles, quick-thinking developers have been flocking to Altadena, cash in hand.” It was fast becoming clear that GoFundMe and relief grants alone wouldn’t be enough for many to endure a process of reconstruction that will unquestionably span many years to come.

Ricardo Lara’s press release reassured that following consumer complaints, his office had recovered $40 million and that between the two fires as of May 12, “insurance companies have paid out nearly $17 billion to residential and commercial insurance policyholders impacted by the Eaton and Palisades Fires.”

Whether the result of a well-organized pressure campaign or something that Lara would have done independently, the market conduct examination promises to be a probe into “the insurance marketplace as a whole, and the individual insurance entities that make up that market, are in compliance with state regulations,” according to a summary by law firm Carlton Fields LLP. There are multiple different ways in which State Farm could be investigated by the California Department of Insurance (CDI). It wasn’t immediately clear the full scope and scale under which the insurer would be examined for fidelity to its policyholders.

The announcement indicated that the expected duration “typically takes several months,” stating that “The Department is currently at a different stage in the claims process for these wildfires, which allows for a more comprehensive regulatory review for an examination of this magnitude and importance. CDI added that “Insurers are now making payment decisions, enabling the Department to evaluate adjuster practices and thoroughly assess State Farm’s methods across a wide range of claims handling.” So in essence, the passage of time seemed likely to enable a better analysis of whether State Farm was behaving unreasonably compared to its fellow, peer insurers. Apples-to-apples, oranges-to-oranges, it was no sure thing that fault would be found.

Litigation over the cause of the wildfires is continuing, with plaintiffs' firms, particularly on the Eaton Fire, working together to force a settlement with electrical utility Southern California Edison (SCE) to accept liability and end the matter amicably. Such a settlement might help homeowners who sell make up for lost valuation as well as providing a further infusion of cash. Like financial literacy, legal literacy is likely to be a problem for many who were affected, fearful of being taken advantage of by unethical firms. You can’t blame people for fearing unknowns.

Will money for rebuilding and transition be left on the table due to a legal education gap? It’s unknown how many Altadenans have joined lawsuits. The literal rush of attorneys along with developers into the disaster zone and contingent marketing has an effect, but the disheartening of Altadena shouldn’t be a defunding that in turn leads to abandonment of recoverable funding.

Despite an ongoing forensic investigation into its de-energized lines over Eaton Canyon, the utility hasn’t admitted fault, and the cause of the Palisades fire is murkier. That hasn’t stopped lawsuits from being filed against the Los Angeles Department of Water and Power over its system management. Bureau of Alcohol, Tobacco, and Firearms investigators in April used test fires to investigate the theory that the Palisades fire had been caused by reignition from an earlier fireworks blaze.

On June 11, SCE ran an unsigned special advertisement in the Los Angeles Times stating that “While the cause remains unknown at this time, we take seriously the possibility that SCE’s equipment was involved in the ignition.” As part of its plans to build a safer power network, including undergrounding, the utility stated that “We are exploring ways to create designated community resiliency zones for extended emergencies, using battery storage at facilities like schools.”

Such batteries would presumably include lithium, which is one of the more challenging hazardous materials disposed of by the Environmental Protection Agency from the disaster zones. The utility, as part of its plans to restore power to damaged areas, has rapidly reconstructed its system in Altadena. According to the privately owned, publicly regulated company, “The cost of the rebuild is estimated at $860 million to $925 million.”

SCE has sought a 10% rate increase to cover this cost. The utility recently settled over the 2020 Bobcat Fire, which burned almost exclusively on federal land in the Angeles National Forest, in the amount of $82.5 million without admitting fault. The probable settlements for the destruction of Altadena are likely to dwarf that amount. New U.S. Attorney Bill Essayli hailed the settlement as only the start: “My office will continue to aggressively pursue recovery for suppression costs and environmental damages from any entity that causes harm to the public’s forests and other precious national resources.” No filing as of yet has been made in regard to the Eaton Fire.

The cost of the Eaton Fire, which claimed at least 18 lives, and the Palisades Fire, which killed another 12 people, will be more than just financial or in lost loved ones. It’s not yet clear if the health costs from toxic exposure will ultimately dwarf direct costs. Already firefighters in Pasadena are testing at high levels for exposure to lead and arsenic, and more alarmingly, the risk to children is also high. After the disclosure that initial remediation efforts of Pasadena Public Schools had failed to thwart the risk, one parent was left remarking, “I would like to know what their plan is for monitoring the health of the children, given you’ve got kids that have already been playing outside in that soil for four months straight.”

Was there another choice? Could we have been better prepared to mitigate the risk? For starters, it’s not news that firefighters face a significant risk of exposure, and while the challenge of reopening schools was very real, was there an alternative? Pasadena Unified School District was infamously the first district outside of the South to be ordered by the Supreme Court of the United States to desegregate its schools with busing. Couldn’t students have been bussed away to neighboring districts with lower risk levels while the lead testing and soil remediation were done? Disasters will happen, but it’s how we respond to scientific uncertainty that defines us.

After the biggest disaster yet of 2025, in writing about the paradox, brilliant Los Angeles Times columnist Gustavo Arellano wrote about the repetitious sharing of quotes: “This time around, though, so many folks have posted the same quotes to the point that the brilliant is becoming banal.” Disaster fatigue is a real symptom, and it might be fair to say that Los Angeles has apocalypse fatigue in some ways, but most certainly not protest fatigue. There was relatively little protest against the rush to normalcy after the “LA Wildfires.” Yes, we have to rebuild, but there has to be safety first, and it’s not clear yet that these lots being sold are actually safe to build on, much less that adjoining neighborhoods don’t face a delayed health risk.

There are going to be fights over this, but the sad truth is that the worst suffering yet to come will be on those least able to manage their risk. California has to get better about how we manage both the causes and responses to disaster. As we continue to embrace a year-round fire season, the reality that our rules and norms must be radically adapted to a changing climate is very real, and even as we look for answers in courts, the truth of community is a consolation.

Perhaps Altadenans should take up litigation against “Big Oil” directly, just as the State of California has done, but money alone won’t fix a community that has been dispersed like a reactive agent onto an oil spill. The office of California Attorney General Rob Bonta, which has sued the oil industry over allegedly misleading the public about the impacts of fossil fuel emissions. The litigation has stalled, with the defendants challenging Bonta’s “personal jurisdiction” and filing motions in defense of commercial speech rights that went all the way to the California Supreme Court, where it’s still facing attempts to have its central claim of climate damage dismissed.

Firefighters and law enforcement don’t get to choose when they respond or where, usually, but the calculations that they have to make are weighted in lives. It’s one thing to be unpopular, but it’s another to not “learn our lesson,” as Lara recently recounted in a May 2 interview with Politico journalist Camille Von Knaevel. Speaking emphatically on managing expectations, he stated: “I can either appease immediate political Band Aid solutions, or I can focus on long-term, difficult, unpopular, solutions that I know I need to take. … My mom humbles me 100 percent and she tells me, ‘We’ve never done the easy thing. I didn’t cross the border and suffer, so that you could do the easy part.’”

UPDATE: Pasadena Unified School District issued the following statement regarding Southern California Edison’s proposal to install battery systems on school campuses following the Eaton Fire: “We are not aware of this program and have no comment.”

UPDATE 2: UPDATE 2: The California Attorney General’s Office provided litigation updates on its case against “Big Oil,” but beyond those notes, “To protect its integrity, we’re unable to comment on, even to confirm or deny, potential or ongoing investigations.”

Link: State regulators launch inquiry into State Farm’s handling of fire claims

Link: Insurance Commissioner Ricardo Lara launches investigation into State Farm's handling of wildfire claims

Link: Insurance chief lives large on campaign cash as homes burn

Link: Eaton Fire Survivors Network

Link: California Opens Investigation Into State Farm

Link: Nearly half of Pasadena Unified schools have contaminated soil, district finds

Link: In Altadena, RV dwellers live next to their homes, straddling burn zone and normalcy

Link: ‘Unfortunately, Altadena is for sale’: Developers are buying up burned lots

Link: Market Conduct Examinations: Are You Prepared?

Link: Investigators finish fire test in Pacific Palisades as search for cause of January’s blaze continues

Link: SCE’s Commitment to Helping Rebuild Los Angeles

Link: Southern California Edison Provides Rebuilding Plan for Electric Distribution in Altadena and Malibu