California State Farm homeowners frustrated by rejected water damage claims. ‘No basis’
When Noel Wise came downstairs on a January morning in 2022, she saw water covering the kitchen floor and spreading into a nearby room in the Fairfield house where she lived.
Shocked, she immediately went through a checklist in her mind: Was it coming from the refrigerator? Or the dishwasher? No and no. How about the sink? She opened a cabinet underneath it and saw water spraying from a plumbing line.
The evening before, Wise had cleaned up after cooking dinner for her then-fiancé and two children. Nothing looked amiss when she went under the sink to grab cleaning supplies, she said later.
Now, the kitchen was flooded and water was spreading into a nearby garage. Wise and her then-fiancé shut off the water to the sink, mopped up the floor and cabinet and called a plumber to fix the leak. The plumber replaced the supply line and said later that it looked like it had burst. A remediation company later tore out flooring and cabinets.
Wise filed a claim with State Farm.
“I didn’t think there would be any issue at all,” she said.
The company rejected the claim, saying the damage was primarily the result of wear and tear and a “continuous or repeated seepage or leakage of water.”
State Farm has regularly used similar reasoning in recent years when refusing to pay for water damage in California, according to attorneys and claim evaluators who work on behalf of policyholders. In doing so, it has treated some water claims as if they were due to ongoing issues, even when homeowners report them as sudden events.
The company has relied on a policy that says it won’t pay for damage to homes caused by a “seepage or leakage” of water “that occurs or develops over a period of time,” that is “continuous” or “repeating” and is from a household appliance or plumbing system.
Lawsuits accuse State Farm General Insurance Company, a provider of homeowners insurance in California, of using that language improperly to deny coverage as part of a larger effort to cut costs for water damage claims while boosting profits.
How often the company has used the policy to deny claims is not known. State Farm, which has traditionally been the largest home insurer in California, does not make its claims data publicly available. The California Department of Insurance also keeps confidential the details of individual complaints it receives from policyholders.
The agency enforces state insurance laws and can pursue disciplinary actions against companies that violate them.
In a statement, Michael Soller, a department spokesman, did not address the specific concerns about State Farm, but said the agency “uses multiple tools to protect consumers from insurance companies improperly denying claims including investigating consumer complaints and conducting market conduct exams.” He said the department would not discuss if it was currently investigating the company’s handling of water damage cases.
State Farm could use the homeowners policy in a sweeping way.
During a February 2024 deposition a senior claims official for the company acknowledged that “every water loss is a continuous leak,” meaning State Farm technically could reject every claim. But, she said, the company had taken the position that if the leak resulted in a large amount of water it would be covered while a “small amount that is going on for however long” would not be.
That has created uncertainty about what claims will or won’t be rejected.
Dylan Schaffer, who represented Wise and her then-fiancé in a lawsuit against State Farm, said the “absence of clear standards is a very effective tool” to help the company save money.
“They deny these claims first,” he said, “and ask questions later.”
State Farm has said it is facing financial challenges in California. In recent years, it announced a pause on adding new policies and that it would drop coverage for roughly 72,000 properties statewide. And it asked the Department of Insurance to allow the company to raise its prices for homeowner policies by an average of 30% across the state.
That was all before the fires in the Los Angeles area, which have caused even greater concerns about California’s troubled insurance market.
A State Farm spokesman, Sevag Sarkissian, declined repeated requests to make company officials available for interviews. In a statement, he said it handles “each claim based on its own individual merits” and works with “customers to understand the facts of their loss, identify the damages and applicable coverages, and resolve their claim.”
‘Abundance of water’
Jeff Garcia was walking through his Folsom home in April of 2022 when he saw a bubble of water in the downstairs ceiling.
It was a few feet wide, sagged about a foot and was dripping. He had just taken a shower and the bubble was below the master bathroom.
Garcia reported the damage to State Farm and received a call from a claim evaluator working for the company. During the conversation, the evaluator said she did not think the claim would be covered, Garcia said, even though she had not yet inspected the home.
Lawsuits filed against State Farm not only accuse the company of misusing its policy to deny water claims, but also say it has inadequately investigated cases before deciding not to cover them.
The claim evaluator eventually came to Garcia’s home on another day. But Garcia said it was more than an hour after he was expecting her and by then he had already left. Garcia’s colleague, who was working at the home at the time, let her in.
Moises Abarca said he showed the evaluator the area of the damage and then walked upstairs with her to the bathroom before leaving her as the inspection continued. Shortly after, Abarca said she came back downstairs and left.
“It was super quick,” he said.
Garcia said the water main valve was turned off at the time of the inspection. Abarca said the claim evaluator did not ask where the valve was located and he did not remember hearing water flowing through the home’s pipes while she was there. Garcia said his Ring camera system showed the evaluator was in the home for fewer than 10 minutes.
The claim was denied. In a letter, the evaluator said it was because the main cause of the damage was due to wear and tear and a defect of the shower arm in the master bathroom, which “resulted in a continuous and/or repeated seepage or leakage of water over time.”
That response angered Garcia, 50, who sued the company.
“If we saw a drip, or maybe an outline of a water stain, and we didn’t do anything about it, we didn’t call or something, I can understand where they’re coming from,” he said. “But this is not what that was. All of a sudden we had an abundance of water in the ceiling.”
Garcia’s lawsuit said State Farm wrongfully denied coverage and that he suffered more than $60,000 in losses. State Farm, in a court document, denied the allegations. Garcia said the case ultimately settled.
“I truly believe that their strategy is to deny first and see how hard you’re willing to fight and use time to make you quit.”
In December of 2023, a water supply line burst in Samuel and Marilee Agajanian’s kitchen, according to a lawsuit filed in Riverside County.
State Farm scheduled an in person inspection, then changed it to a video call.
During the call, a claim evaluator asked Samuel to place his cell phone under the sink so she could view the area where the leak occurred, the lawsuit said. The couple said that part of the inspection went on for no more than a minute before the evaluator said she had seen enough.
Later that day, the evaluator denied the Agajanians’ claim and cited “wear, tear and/or deterioration of the plumbing to your kitchen sink, resulting in an intermittent, continuous or repeated seepage or leakage of water,” according to the lawsuit.
“What reasonable insurance company can deny a claim on that exclusion without doing a proper and thorough investigation?” said Kevin Pollack, an attorney representing the Agajanians. “It’s a shame and a disservice to policyholders who pay a hefty premium for an insurance company to be there in their time of need.”
State Farm, in a court filing, denied the allegations in the case and stood by the decision to reject the claim.
The lawsuit, which is pending, said Marilee, who had part of her right leg amputated in 2020 and has had several spinal surgeries, has at times resorted to going up and down the stairs in the couple’s home to wash dishes in a bathtub.
‘No basis’
In Wise’s case, State Farm officials did not inspect the home before deciding to deny the claim.
In depositions, they said they relied, in part, on utility records, which they argued did not show a sudden burst of water. But a senior operator with Fairfield’s water utility said in a deposition “there’s a pretty good chance” the home’s meter would not pick up a leak that was a small stream of water.
Wise, 34, said State Farm had “no basis” to reject the claim. She said she was constantly in and out of the cabinet under the sink in the days before the leak.
“I would have seen if something was wrong.”
She said the kitchen and flooring in other parts of the home went unrepaired for two years. Wise and her then-fiancé have since split up and she no longer lives in the house. Their lawsuit settled last year.
Wise said she won’t use State Farm again in the future.
This story was originally published February 3, 2025 at 5:00 AM.
