Farmers Insurance will refund $1.4 million to thousands of California homeowners and also agreed to pay $2 million in penalties to settle complaints the company overcharged policyholders.

Sate officials said the settlement came after a California Department of Insurance investigation, which was triggered by customer complaints, found the insurer was classifying some homes as having a high fire risk when those homes should have been classified as having a lower fire risk, said department spokeswoman Jennifer Kerns.

Farmers denied wrongdoing, saying a computer error caused the company to overcharge 6,000 customers. The glitch has been fixed, Farmers said.

As part of the settlement, Farmers agreed to work with the department to develop better guidelines to assess a home’s fire risk and determine whether or not to cancel policies.