New ruling on insurance coverage for smoke damage is a big win for wildfire victims
By Shant Karnikian
A Los Angeles judge recently ruled that the California FAIR Plan’s handling of smoke damage claims is unlawful—a landmark decision that could redefine insurance coverage standards for wildfire-related damage across the state.
Over the past few years, California homeowners and renters have faced an escalating crisis of insurance affordability and availability.
Rates have skyrocketed, upwards of 600% in some at-risk areas–– and several major insurers have pulled out of the state altogether amidst an unprecedented series of wildfires, and increasing risk of climate-driven disasters, which, insiders say, has strained the industry to a breaking point.
Desperate for coverage, an increasing number of homeowners have opted for a FAIR Plan policy. This plan, officially known as the California Fair Access to Insurance Requirements Plan, is a barebones, last-resort option — a stop-gap measure providing minimal coverage at high premiums.
Over the last five months, the FAIR Plan has received more than 5000 claims related to the January 2025 firestorms that devastated Altadena and the Pacific Palisades.
Over 3600 of the claims come from the Palisades, where, according to FAIR Plan data, 22% of the structures within CAL FIRE’s incident map were covered by the plan. (In 2024, one Palisades zip code saw an 85% year-over-year increase in FAIR Plan policies, as State Farm cut close to 70% of its policies in the same area.) In Altadena, 12% of structures within the Eaton fire’s impact area were under FAIR policies. According to the L.A. Times, “From 2020 to 2024, the number of homes in both areas on the plan nearly doubled from 14,272 to 28,440.”
For many homeowners in vulnerable areas, dropped abruptly by their previous providers, FAIR was the only available choice besides going without insurance altogether.
About 45% of Eaton and Palisades fire claims are partial claims, meaning the policyholder suffered damage but not total loss. And the FAIR plan has come under a different kind of fire for its handling of one particular kind of partial claim—smoke damage.
Initially, after this winter’s blazes, fire-zone residents who hadn’t lost everything seemed extremely fortunate. But then, many property owners got a very rude awakening. Not only did many families return to find their window seals melted, their homes permeated by toxic ash, soot, and residues from neighboring structures that burned, containing lead, asbestos, and various contaminants, but they also found themselves with six-figure cleaning, repair, and remediation bills — and insurance claim denials.
In 2017, the FAIR Plan implemented changes to its terms, notifying policyholders that claims for fire-related damages must now include “direct physical loss,” defined as “permanent physical changes” to property. At the time, FAIR acknowledged that this change would “result in the denial of claims that might have been paid under prior policy wording,” the L.A. Times reported.
The new criteria and vague language made it easier for FAIR to deny or underpay on smoke damage claims.
What smoke damage does
While smoke may not reduce a home to rubble, It can leave obvious stains, permanent discolorations, strong odors, and residues. But the harm it causes is much more than cosmetic.
The fine particles in smoke can penetrate walls, flooring, countertops, electrical outlets, fabrics, and any porous surfaces. Smoke can get inside HVAC systems and major appliances. It can rust, pit, and corrode metals. It can weaken structures while its toxins embed in your home’s wooden surfaces and frames.
Smoke is hazardous to your health, often carrying carcinogens from burnt materials nearby, such as plastics, wood, and upholstery. People living in smoke-damaged homes may develop respiratory problems and other symptoms.
In other words, many homes that are still standing, spared by the actual flames, are nonetheless uninhabitable.
Yet some FAIR policyholders impacted by the January fires have reported that the plan refused even to conduct environmental testing.
According to Insurance Journal, “As of May, the Department of Insurance’s consumer services division had received about 120 complaints regarding FAIR’s handling of smoke damage claims related to the LA-area wildfires. The situation is so difficult that some homeowners say they wish their house had simply burned down, said Michael Soller, the department’s deputy commissioner of communications.”
A victory for smoke damage victims
On Tuesday, this week, L.A. County Superior Court Judge Stuart Rice ruled that “the California FAIR Plan violates the state’s insurance code because it offers less coverage than is required by state policy. That policy provides coverage for all ‘loss by fire’ damage,” the L.A. Times said.
The Daily Journal reported, “A Los Angeles County judge has ruled that the California FAIR Plan Association’s smoke damage policy is illegal….[The] ruling validates, for now, claims that the state’s insurer of last resort systematically underpaid or denied smoke-damage claims.”
According to the Daily Journal, thousands of similar lawsuits have been filed since 2017. This key ruling, although it is not binding case law, opens a pathway for victims of other recent wildfires to seek justice as well, and sends a clear message to the California FAIR Plan and the insurance industry in general. This is no longer simply fire victims arguing that they’ve been treated unfairly. The court has ruled that FAIR’s smoke damage policy violates California law.
Kabateck LLP currently represents dozens of victims of the Eaton fire, many of whom suffered smoke and ash damage. KBK represented more than 2,500 homeowners who suffered damage to their homes as a result of the 2009 Station fires. Farmers Insurance systematically and in bad faith either refused to pay valid claims or severely underpaid valid claims as a result of damages from these fires. KBK successfully litigated hundreds of cases, stemming from fires in 2007, 2008, and 2009.