The Six-Figure Sweet Spot for Screwing Insurance Policyholders

Shant Karnikian
Managing Partner

We’ve been helping wildfire victims after the most recent fires in LA, and one thing has become clear: insurers are getting bolder. The tactics aren’t new—but they’re showing up more often, and with less subtlety. Whether it’s denying smoke claims, demanding impossible inventories, or cutting off living expense benefits too early, the pattern is unmistakable.

These moves hit one group the hardest: working-class families with six-figure losses. Not small enough to wave through. Not big enough to pose a serious threat. Just the right size for delay, pressure, and underpayment.

Here’s how it plays out:

1. Toxic Smoke & Ash Isn’t Damage?

Insurers—especially California FAIR Plan Association—are now flat-out denying claims for smoke and ash unless the home shows “permanent physical change.” That’s their phrase. But it doesn’t match what California law requires. Under Insurance Code § 2071, fire policies must cover damage caused by fire—there’s no qualifier requiring it to be permanent. Smoke infiltration, residue, and ash contamination are physical changes. Pretending otherwise is just a denial strategy in disguise.

2. Total Loss? Prove It, Line by Line

Even when homes are reduced to ash, insurers are demanding detailed personal property inventories before releasing benefits. That means listing every lost item—clothing, books, plates, tools—along with estimated value. One of our clients, a senior with no surviving records or tech access, was asked to do just that. The home was gone. The coverage was already insufficient. What are they really trying to protect against? Fraud? No—this is about delay and making the process painful enough that people give up.

3. ALE Cutoffs in Disaster Zones

Another emerging trend I keep seeing is insurers terminating Additional Living Expenses (ALE) far too early. We’ve seen clients told to move back in while their neighborhoods still resemble disaster zones—homes half-burned, air contaminated, utilities unreliable. The message: your policy has done enough. Now go figure it out.

A Pattern—and a Target

These aren’t million-dollar claims. They’re not nuisance-value throwaways either. They’re working-class families trying to recover from six-figure losses. That’s the insurance industry’s favorite place to play games:

• Not small enough to get paid and pushed out the door.
• Not big enough to truly scare the carrier.

And for lawyers? These are heartbreaking cases that are often too resource-intensive to litigate on contingency. That’s exactly what the insurers are counting on. So they stall. They nickel-and-dime. They play defense. And unless you catch them, they win.

So What Do We Do?

I don’t have a perfect solution. Maybe it’s more regulation. Maybe more lawyers need support to take these cases. Maybe we need to shame these carriers into doing the right thing.

But I do know this: This is systemic. This is deliberate. And it needs to be called out. These stories need to be told. These stories need to be told. Because every one of these tactics is built on the hope that people will quietly give up.