California Fair Plan Problems

When is Smoke Damage, not Smoke Damage?

CALIFORNIA FAIR PLAN PROBLEMS

WHEN IS SMOKE DAMAGE

NOT SMOKE DAMAGE?

In 1968, after the Watts Riots and major wildfires, the insurance industry in California, decided to create an organization which would make it easier for hard-to-insure homes to obtain the coverage they needed, thus the California Fair Plan Program was developed.

The Plan was to provide coverage for the very hard-to-insure homes that the major carriers of the time would not provide coverage for. Things went along fine for a long time until a series of very destructive wildfires hit California, causing some of the carriers to increase their premiums or to suspend writing policies in fire prone areas all together.

In the last few months, California has been ravaged by intense wildfires that have caused untold billions of dollars’ worth of damage. However, an interesting development in the process of determining what is covered has taken place at the California Fair Plan and their interpretation of smoke damage coverage.

Apparently, smoke damage, which is named as a covered peril, is not going to be covered. This situation has resulted in a legal action being initiated on behalf of the 350,000 California Fair Plan Policy holders to, hopefully, obtain a proper definition of what constitutes Smoke Damage.

The California Fair Plan lists the following perils as covered:

Fire Damage

Smoke Damage

Lightning

Explosions  

After having spent a total of 40 (+) years as a Property Loss Specialist, I was most interested in the adjustment decision concerning what constitutes a Smoke Damage Claim. No doubt thousands of such claims are being submitted due to the wildfire damage in California, with many more to come…

When a claims adjuster responds to an insured smoke damage claim, one of the first things the adjuster should do is attempt to inspect all of the exterior exposures of the risk to determine and document the condition. Also, since it is a smoke damage claim, the adjuster will document in the file the distance of the risk location to the closest part of the fire. The property may be within two miles of the fire or over six miles from the fire.

The claims adjuster can also be looking for evidence of window(s) left open. Please note that if evidence of direct loss from a fire is present to the exterior, a flame could have ignited the window and/or windowpane causing the glass to break and letting smoke into the interior.

The key to coverage for smoke damage is of course the visual evidence of staining from smoke, as well as the smell.

For the evaluation of the loss amount, interior restoration companies can clean all content items.  This will include linens such as towels, curtains, and bedding. If after cleaning, it is apparent the item cannot be restored to its pre-loss condition, it can be evaluated as a total loss.

The only way I believe that a smoke damage claim can be denied, is if the insurance company believes and can prove that a fraudulent act by the insured is present.

The best advice I can give to adjusters evaluating the damage in California and these terrible fires is what was given to me many decades ago, “When you inspect a loss, always look for coverage, that way if you cannot find it you can in good conscience recommend a denial.”

Respectfully Submitted,

Norman Lambe

nwlambe@gmail.com