A brokered deal with regulators and consumer advocates will allow State Farm General to keep controversial increases in home insurance rates that took effect last year in the wake of the devastating Los Angeles wildfires.

The agreement sent to a judge late Friday cements a $530-million emergency hike in home insurance rates Insurance Commissioner Ricardo Lara negotiated with the insurer last summer.

“The agreement will provide financial relief to many policyholders while ensuring continued coverage for State Farm policyholders while California’s insurance market stabilizes,” the insurance department said in a news release.

State Farm argued the emergency hike was necessary because catastrophic fire losses jeopardized its financial ratings.

The company has reported that it paid out $6.2 billion in claims last year, largely from the wildfires, with most of the costs covered through reinsurance payments. The company has told regulators it anticipates to pay an additional $1 billion in claims.

The deal allows the insurer to keep an average 17% increase in homeowner rates. Local rates for many of the company’s 1 million home customers were much higher.

However, consumer advocates argued the agreement held the line on even higher increases and halted further policy cancellations that have deepened a crisis in the state’s insurance industry.

State Farm, California’s largest home insurer, froze new business in 2023, announced 72,000 mass non-renewals, and sought a series of rate hikes. Its average homeowners premium in California doubled from 2020 to 2024.

Under Friday’s agreement, State Farm agrees to forgo mass non-renewals in 2026 and undergo further review of its rates by 2027.

Additionally, State Farm will be required to return nearly two-thirds of its 15% increase to condominium owners, deliver a small refund to rental property owners and be able to raise premiums for renters a half a percent.

“This rate enables State Farm General to continue serving existing California customers,” the company said in a statement. “We will continue to monitor our capacity to support the risks we insure and maintain the financial strength needed to pay claims and support customers and communities when it matters most.”

If approved by an administrative law judge, the settlement will be forwarded to Lara, who is expected to back it.

The arrangement sidesteps efforts to tie State Farm’s rates to its handling of disaster claims.

Under pressure from community advocates and lawmakers, Lara in May had said he wanted the two issues evaluated together.

In June, Lara announced his department would conduct an “expedited” examination into State Farm’s market conduct. In rate hearing proceedings, agency staff sought to block discussion of State Farm’s claims handling in relation to its quest for premium hikes.

The pact does not directly address complaints of unhappy policyholders who say Lara’s administration has failed to hold State Farm accountable, which the insurance department has disputed.

A department spokesman said Lara would not comment on the matter while the rate settlement is before an administrative judge.

The Jan. 7, 2025, firestorm destroyed at least 16,000 homes, triggering more than 42,000 insurance claims. State Farm has said it has 13,500 fire and auto claims related to the fires.

The insurer has come under heavy criticism from fire victims over its handling of claims, including complaints of low payout offers, denials for toxin testing and delays in payments for living expenses. The company has declined to comment on the complaints.

Some 51,000 State Farm homeowners live in disaster areas struggling to recover from the L.A. firestorm. Regulatory filings show those areas among the hardest hit by the current hikes.

Malibu resident Chad Peters said his bill from State Farm increased 140% in the last year, from $3,500 to $8,400.

Peters said he has battled State Farm for 14 months over smoke and fire damage to his home from the Palisades fire, and that the insurer at one point attempted to cancel his coverage because the house remained unrepaired.

He called rate increases in such circumstances “ludicrous, while they’re giving everyone such a hard time with their insurance … I mean, mine has been a steep uphill battle all year long.”

Sen. Sasha Renée Pérez (D-Alhambra) had urged Lara to delay hikes until after the investigation into State Farm’s conduct.

“The fact that I have so many individuals who have not received any of their claims, that are still navigating denials and delays, who are actively running out of [living expense payments] and … facing housing insecurity — it makes me deeply concerned,” Pérez said.

Pérez, along with Sens. Ben Allen (D-Pacific Palisades) and Sade Elhawary (D-Los Angeles), in April pressed Lara to defer rate hikes until State Farm General’s claims practices could be investigated. “This was a big priority for us.”

Pérez said she would seek answers to the market conduct exam as part of a Senate inquiry into the insurance department’s handling of those complaints, along with scrutiny of the department’s discipline of a compliance officer who criticized State Farm’s handling of claims.

State Farm General, an offshoot of national insurance giant State Farm Mutual, contends it has been financially sinking as seasonal wildfires morph into catastrophic urban conflagrations that destroy towns.

In mid-2024, the company asked to raise home premiums by nearly $1 billion. Lara secured an agreement that State Farm Mutual lend its California affiliate $400 million, but the insurer would not agree to cancel plans for dropping 11,000 more policyholders.

The settlement allows State Farm to avoid a public hearing that would have forced the disclosure of solvency records, mass non-renewals and other information it said would help competitors.

It’s becoming clearer with every passing day that the only people making a serious effort to come to grips with the implications of artificial intelligence for society aren’t legislators, or business leaders, or AI promoters themselves. They’re judges.

Indeed, in recent weeks, judges in two federal cases have drawn a line that seems to have eluded many others contemplating AI. The cases relate to copyright law and attorney-client privilege.

In both cases, the judges have effectively declared that AI bots are not human. They don’t have rights reserved for people, and their outputs don’t deserve to be treated as though they come from human intelligence or have any special high-tech standing.

There’s more to those cases than that. Both cases, including one that got as far as the Supreme Court, underscore the determination of AI promoters and uses to infiltrate the new technology deeper into society.

Start with the more recent case. On Monday, the Supreme Court declined to take up a lawsuit in which artist and computer scientist Stephen Thaler tried to copyright an artwork that he acknowledged had been created by an AI bot of his own invention. That left in place a ruling last year by the District of Columbia Court of Appeals, which held that art created by non-humans can’t be copyrighted.

The case revolved around a 2012 painting titled “A Recent Entrance to Paradise,” depicting train tracks running under a bridge and disappearing into vegetation. Thaler wrote in his application for a copyright that the “author” of the work was his “Creativity Machine,” an AI tool, and that the work was “created autonomously by machine.”

The appellate ruling didn’t engage in artistic criticism, but the work’s artificial origin might be manifest to the discerning eye — its landscape is busy yet indistinct, sort of a melange of green and purple, and the framing doesn’t have any artistic logic — the eye doesn’t know what it’s supposed to be following. But Thaler says it’s the AI bot’s creation and wasn’t generated in response to any user prompt.

In any event, for Judge Patricia A. Millett, who wrote the opinion for a unanimous three-judge panel, the case wasn’t a close one. She cited longstanding regulations of the Copyright Office requiring that “for a work to be copyrightable, it must owe its origin to a human being.”

Millett noted that Thaler hadn’t bothered to conceal the non-human origin of “A Recent Entrance,” acknowledging in court papers that the painting “lacks human authorship.” She rejected Thaler’s argument, as had the federal trial judge who first heard the case, that the Copyright Office’s insistence that the author of a work must be human was unconstitutional. The Supreme Court evidently agreed.

Thaler told me he didn’t see the Supreme Court’s turndown as a “legal defeat.” In a LinkedIn post about the case, he wrote that the decision “represents a philosophical milestone — one that exposes how deeply our intellectual property system struggles to confront autonomous machine creativity.”

As that suggests, Thaler believes we shouldn’t distinguish how we view human creations from machine outputs. “Intelligence, creativity, and invention are not limited to human products,” he told me by email. Autonomous computational systems such as his AI program, he said, “can generate these functions independently.”

Millett’s ruling actually opened the door to admitting AI into the copyright world — but only when it’s used as a tool by a human author. What set Thaler’s case apart from those, she wrote, was his insistence that his AI bot was the “sole author of the work” (emphasis hers), “and it is undeniably a machine, not a human being.”

That brings us to the second case, which involved the question of whether an AI bot’s work should be protected under attorney-client privilege. Federal Judge Jed S. Rakoff of New York ruled, concisely, “The answer is no.”

As I’ve written in the past, Rakoff is one of our most percipient jurists about the impact of new technologies on the law. In his occasional essays for the New York Review of Books, he’s examined how a secret AI algorithm has skewed the sentencing of criminal defendants (especially Black defendants), how cryptocurrency advocates have made a tangle of existing laws on fraud, and how the misuse of cognitive neuroscience has resulted in convictions based on false memories.

In other words, Rakoff isn’t a judge you should try snowing with technological flapdoodle.

The case involved one Bradley Heppner, who was indicted by a federal grand jury for allegedly looting $150 million from a financial services company he chaired. Heppner pleaded innocent and was released on $25-million bail. The case is pending.

According to a ruling Rakoff issued on Feb. 17, the issue before him concerned exchanges that Heppner had with Claude, the chatbot developed by the AI firm Anthropic, written versions of which were seized by the FBI when it executed a search warrant of Heppner’s property.

Knowing that an indictment was in the offing, Heppner had consulted Claude for help on a defense strategy. His lawyers asserted that those exchanges, which were set forth in written memos, were tantamount to consultations with Heppner’s lawyers; therefore, his lawyers said, they were confidential according to attorney-client privilege and couldn’t be used against Heppner in court. (They also cited the related attorney work product doctrine, which grants confidentiality to lawyers’ notes and other similar material.)

That was a nontrivial point. Heppner had given Claude information he had learned from his lawyers, and shared Claude’s responses with his lawyers.

Rakoff made short work of this argument. First, he ruled, the AI documents weren’t communications between Heppner and his attorneys, since Claude isn’t an attorney. All such privileges, he noted, “require, among other things, ‘a trusting human relationship,’” say between a client and a licensed professional subject to ethical rules and duties.

“No such relationship exists, or could exist, between an AI user and a platform such as Claude,” Rakoff observed.

Second, he wrote, the exchanges between Heppner and Claude weren’t confidential. In its terms of use, Anthropic claims the right to collect both a user’s queries and Claude’s responses, use them to “train” Claude, and disclose them to others.

Finally, he wasn’t asking Claude for legal advice, but for information he could pass on to his own lawyers, or not. Indeed, when prosecutors tested Claude by asking whether it could give legal advice, the bot advised them to “consult with a qualified attorney.”

In his ruling, Rakoff did make an effort to address the broader questions judges face in dealing with AI. “Only three years after its release,” he wrote, “one prominent AI platform is being used by more than 800 million people worldwide every week. Yet the implications of AI for the law are only beginning to be explored.”

He concluded that “generative artificial intelligence “presents a new frontier in the ongoing dialogue between technology and the law….But AI’s novelty does not mean that its use is not subject to longstanding legal principles, such as those governing the attorney-client privilege and the work product doctrine.”

In this case and elsewhere, Rakoff has shown a superb grasp of technology issues. In his 2021 essay about the AI algorithm capable of sending people to jail, he put his finger on the factor that makes the very term “artificial intelligence” a misnomer.

The term, he wrote, tends to “conceal the importance of the human designer….It is the designer who determines what kinds of data will be input into the system and from what sources they will be drawn. It is the designer who determines what weights will be given to different inputs and how the program will adjust to them. And it is the designer who determines how all this will be applied to whatever the algorithm is meant to analyze.”

He’s right. That why judges have had so much trouble determining whether the AI engineers feeding information into chatbots to make it seem like they’re “creative” and even “sentient” are infringing the copyrights of the original creators of that information, or creating something new.

The problem is that they’re asking the wrong question. Everything an AI bot spews out is, at more than a fundamental level, the product of human creativity. The AI bots are machines, and portraying them as though they’re thinking creatures like artists or attorneys doesn’t change that, and shouldn’t.

Californians are feeling more pain at the pump than any other state as the conflict with Iran pushes up prices.

Spencer Shearer was filling up his Nissan Sentra on Friday morning at the Chevron station in Brentwood near San Vicente and Montana avenues and paying a rate higher than almost anywhere else in the country: $5.55 per gallon.

“It sucks,” Shearer said as he watched his bill on the pump click toward $50.

With the continued conflict in and around Iran, gas prices are rising. In the Los Angeles area and a few places around the San Francisco Bay Area, the cost of gas has cracked $5-per-gallon again and is even tipping toward $6 in a few places.

The spreading conflict in the Persian Gulf has had a predictable but unwelcome impact on California drivers. Californians usually pay far more for gas than people in other states.

Its pole position on prices is continuing with the latest surge.

The average cost of a gallon of regular gas in California is the most expensive in the country at $4.91, up 6% from a week ago and 11% from a month ago, according to AAA. The nationwide average is $3.32 per gallon.

The conflict with Iran has strangled movement through the Persian Gulf and catapulted the price of a barrel of oil.

The prices in California are higher than in other states because of higher taxes and stricter requirements for cleaner, more expensive gas that pollutes less. This has been a festering issue not only for the industry but also for consumers.

Fuel marketers, gas station owners and some voters have blamed Gov. Gavin Newsom’s policies.

Newsom told regulators in 2021 to stop issuing fracking permits and phase out oil extraction by 2045. He also signed a bill allowing local governments to block the construction of oil and gas wells. He seemed to ease his stance last year and signed a bill allowing up to 2,000 new oil wells per year through 2036 in Kern County, which produces about three-fourths of the state’s crude oil.

As a result of the policies that seem aimed at punishing oil producers, California has seen a steady decline in crude oil production, making it more reliant on oil and gasoline supplies outside the state.

In 2024, only 23% of the crude oil refined in the state was pumped in California, with 13% from Alaska and 63% from elsewhere in the world, including about 30% from the Middle East, according to the Western States Petroleum Assn.

The primary reason gas prices in California are high is that refinery closures are reducing local supply while demand has remained high, said Zachary Leary, chief lobbyist at the Western States Petroleum Assn.

“Geopolitical events … show and highlight how fragile it is here in California,” he said.

California’s special gasoline blends are increasingly imported from overseas and can require more than a month to transport, he added.

Supply bottlenecks have been exacerbated by recent refinery closures, including the Phillips 66 refinery in Wilmington in October and the idling and planned closure of the Valero refinery in Benicia, which reduced refining capacity in the state by close to 20%.

It is hard to predict how long this spike in prices will stay, said Severin Borenstein, faculty director of the Energy Institute at UC Berkeley’s Haas School of Business.

“We don’t know whether the war will widen or end quickly,” said Borenstein. “Those things will drive the price of crude.”

At the Brentwood gas station, product manager Conner Uretsky, 30, waited as his partner refueled her Toyota Prius ahead of a trip to Palm Springs. Lately, he said, surging fuel costs have made him think twice about going on road trips.

Uretsky, who moved to Los Angeles from the East Coast about six years ago, said he was initially shocked by the region’s high cost of living.

“Gas prices are crazy,” he said.

Paula, a writer who declined to share her last name, said she was “furious” at President Trump’s decision to start a war with Iran, as well as his recent actions in Venezuela and threats against Greenland and Cuba.

“If you look at who’s paying for this war, we are,” she said, pointing to the fuel price flip sign as she waited for her Volvo hybrid SUV to refuel.

Shearer says he has to be more careful with his gas budget. The business analyst tries to find the least expensive gas near his home in Los Angeles. Still, he’s gotten used to California’s high prices.

“It feels almost normal to be paying this amount,” he said.

Times staff writer Laurence Darmiento contributed to this report.