Is My Smoke Damage Claim Covered?

By this time, most people in California have been informed that a substantial percentage of the adjustment of the fire damage claims from the Pacific Palisades and Eaton fire storms is subject to the involvement of The California Fair Plan, this being due to several large Insurance carriers canceling policies in the Pacific Palisades and Altadena burn areas. One of the eye-opening results of the Fair Plan’s involvement, has been the denial of claims due to smoke damage from the fires that their insureds have presented.

The information that has been provided to date indicates that some of the smoke damage claims are being denied by the Fair Plan without an inspection which could present a problem for making the denial stick.

Speaking as a (retired) Property Claims Specialist, when a property loss is received in a claims office, such as one of the thousands that were submitted due to the fires in Pacific Palisades and Altadena, the Insurance company that covers the risk needs to have a representative on site to look at, inspect and document each element of the damage which would include smoke damage.

Many times, when losses such as Pacific Palisades and Altadena (Eaton), are submitted, the insured risk may not have been damaged by flames from the fire, meaning actually being burned down, but the smoke, and dust have permeated the interior of the structure, as well as the Personal Property items; the result is that the property can be just as damaged from the smoke, as from the flames.

The following paragraph is taken from the California Fair Plan’s Dwelling Property Policy CFP 0001 (07/2017), which states Smoke Damage Coverage:

PERILS INSURED AGAINST

Unless the loss is excluded in General Exclusions, or below, we insure for “direct physical loss” which is defined as any actual loss or physical damage, evidenced by permanent physical changes to the covered property caused by…

3. Smoke Damage

When used in this policy Smoke Damage means sudden and accidental direct physical loss from smoke (including airborne, windborne, or wind driven combustion by products such as carbon/soot/ash/char/debris), that is visible to the unaided human eye, or odor from smoke that is detected by the unaided human nose of an average person and not by the subjective senses of you or by laboratory testing.

In reference to the Policy language just quoted, a claim which is the result of a “direct physical loss”, such as the fire damage incurred by the Pacific Palisades and Altadena residents, we see a claim that is beginning to indicate it might just be covered by the Fair Plan policy. The footage of the fires indicate enough smoke, carbon, soot, ash, char and debris was produced to fill the Grand Canyon. If the initial cause of the claimed smoke damage resulted initially from a covered cause of loss, such as the fires, the smoke damage would be covered as well.

With an effort to attempt to clear things up, the California Department of Insurance issued a directive to attempt to explain the direct physical loss to property which is the result of a covered cause of loss. The following paragraph explains further:

The bulletin addresses the implications of recent court cases on the coverage of smoke damage claims. The California Supreme Court’s decision in Another Planet Entertainment, LLC v. Vigilant Insurance Co. confirmed that smoke damage can be covered under policies that insure against “direct physical loss or damage to” property. The court clarified that such coverage requires a distinct, demonstrable, physical alteration to the property, which need not be visible to the naked eye or structural but must result in some injury or impairment to the property.

In a misguided attempt to reduce the claim expense for the Fair Plan denials were issued for losses claimed by policyholders the Fair Plan executives believed could be handled by the insured themselves, which is very bad business. Each claim needs to be examined individually and evaluated against the language described in the insurance policy, and not trying to make the insurance policy bend to fit the circumstances of the claim.

If you have questions, please contact me at the email address below.

Respectfully Submitted,’

Norman Lamber