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Newsweek
10 hours ago
- Business
- Newsweek
California Ruling Could Force Change to Home Insurance Rules
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. A scathing court ruling that found California's fire insurer of last resort in violation of state law for denying policyholders coverage for wildfire-related smoke damage could have major implications for the state's home insurance market, according to experts. On June 24, Los Angeles Superior Court Judge Stuart M. Rice ruled that the California FAIR Plan's smoke-damage policy, which requires smoke damage to be "visible to the unaided human eye" or capable of being "detected by the unaided human nose of an average person" rather than being perceptible "by the subjective senses of [the insured] or by laboratory testing" is unlawful under state law. The decision was taken in response to a lawsuit filed in 2021 by Lake Tahoe homeowner Jay Aliff, whose property was damaged in the Mountain View fire in November 2020. But it could now impact thousands of lawsuits filed since 2017, including claims related to the devastating blazes that ravaged Los Angeles County in January. A man walks through the remains of burned vehicles and homes in Altadena, California, on January 24, 2025. A man walks through the remains of burned vehicles and homes in Altadena, California, on January 24, 2025. ALI MATIN/Middle East Images/AFP via Getty Images How California Insurers Have Approached Smoke Damage Several California homeowners whose homes were not destroyed by fires but significantly damaged by smoke, toxic ash and debris found that their insurers would not pay to cover the clean-up and remediations—all expensive activities. Luis Cazares, whose home in Altadena survived the January fires but was made inhabitable by toxic levels of lead brought in by smoke, discovered the gap in his coverage the hard way. After asking the state's insurer of last resort to help him remove and replace contaminated objects and clean up the property, Cazares received a stark rejection—"Clean it yourself"—and a damage claim payment much below what his coverage would include. Last month, he filed a lawsuit against the FAIR Plan—one of many initiated by wildfire survivors affected by the January blazes. For all of them, last week's court ruling was a victory and a sign that things are changing in a state that seemed to turn a blind eye toward smoke damage. In May, California Department of Insurance Commissioner Ricardo Lara admitted that, for decades, the state had lacked consistent guidelines on how to approach insurance coverage and clean-up of smoke-damaged homes. "The result is confusion, delays and families forced to return to unsafe homes. Consumers are angry and rightly so. Californians deserve better," Lara said, announcing the creation of a task force within the CDI that would recommend "science-based standards, best practices for smoke restoration of homes and personal property, and enforcement tools to the Department that ensure Californians are treated fairly in the wake of wildfire smoke exposure." Judge's Decision It has taken years for a judge to recognize the FAIR Plan's approach to smoke damage as "unlawful," despite years of complaints from policyholders. The lawsuit that triggered the decision is years old and has been fought tooth-and-nail by the state's fire insurer of last resort. "The FAIR Plan filed numerous challenges to the complaint, and because the case was originally filed as a putative class action, there was a battle over class certification, which was eventually denied," Joseph Balice, a California-based attorney working for Haynes Boone Insurance Recovery, a company that helps policyholders recover insurance coverage benefits when carriers deny, delay or underpay claims, told Newsweek. The homeowner, Aliff, moved for summary adjudication—the California state court equivalent of partial summary judgment—in March 2025, and the ruling was issued late last month. "California law requires that homeowners insurance policies provide at least as much coverage as the standard form set forth in California Insurance Code section 2071," Balice said. "In this case, the court found that the FAIR Plan was not providing at least the minimum coverage required because it had limited coverage for smoke damage by imposing additional qualifications and conditions not permitted under the statute." How Ruling Could Change California Insurance Market Aliff's attorney, Dylan Schaffer, described the judge's ruling last week as "the most important decision in California insurance law in decades." Considering likely appeals that may follow the judge's decision, the FAIR Plan is expected to change its policy forms to conform to the court's ruling and potentially pay other claimants whose claims were previously denied under the existing language that was found to be unlawful, Balice said. "Homeowners that have previously had their claims denied based on these unlawful provisions should seek to have their claims re-examined and consider legal action," he urged. "And this decision sets a valuable precedent going forward, and we would expect any insurance company imposing these 'unlawful' restrictions on coverage to revise their policies to remove them and provide the coverage California law requires." FAIR Plan spokeswoman Hilary McLean already said that the insurer is working with California regulators to revise its language around smoke damage. "As the FAIR Plan is in the process of updating its policy language to reflect the manner in which claims have been adjusted since last year, it is unlikely to pursue an appeal," she told the Los Angeles Times. Newsweek contacted the FAIR Plan for comment by email on Wednesday.
Washington Post
5 days ago
- Business
- Washington Post
California court rules state insurance policy on smoke damage is unlawful
A California judge has ruled the state's bare-bones home insurance program's handling of smoke damage claims is unlawful, a decision that could have wide-ranging implications as insurers increasingly deal with the aftermath of wildfires. Home insurance broadly covers fire damage, but there is a growing dispute over what damage must be covered when flames don't torch the property. The decision Tuesday by Los Angeles Superior Court Judge Stuart M. Rice is a victory for homeowners in a state where the risk of catastrophic wildfires has intensified alongside a brewing home insurance crisis. The specific case involved Jay Aliff, who sued in 2021 over the insurance payout for his house near Lake Tahoe, which was damaged in the November 2020 Mountain View fire. His lawsuit challenged the California Fair Access to Insurance Requirements Plan, or the FAIR Plan, the state's high-risk insurance pool or the last-resort option for those dropped by private insurance companies. With high premiums and basic coverage, the FAIR Plan was designed as a temporary safety net until policyholders could find a more permanent option. Today, it has become the default option for many, with the number of residential policies reaching 550,000 in March, more than double from 2020, state data shows. Reports from other urban wildfires , in which building materials, appliances, cars and more burn at incredibly high temperatures, show increased levels of heavy metals including lead and polycyclic aromatic hydrocarbons (PAHs) such as benzene that are tied to negative health risks. But insurance companies haven't standardized testing for those contaminants. The FAIR Plan has been scrutinized for years over allegations of summarily denying smoke damage claims unless there's proof of permanent physical change, even though the California Department of Insurance has long determined that that threshold is illegal. Aliff's lawsuit claims that FAIR Plan at the time offered a fraction of the money he expected to cover the costs to remediate the damages, citing a partial denial letter that said the fire debris could be cleaned up –- and therefore didn't qualify for coverage as a 'direct physical loss' to the home. 'The things that burn are terrifying like lead, cyanide. It's not possible to get that out with Swiffer,' said Aliff's attorney, Dylan Schaffer, referring to the brand of disposable mops. Schaffer, who is also the attorney in a number of other lawsuits against the FAIR Plan related to the smoke damage issue, said the new court ruling was a game-changer in California insurance law at a time when thousands of homeowners in the recent Palisades and Eaton wildfires are still fighting for coverage. 'It is the most important decision in California insurance law in decades,' Schaffer said. 'It draws a line in the sand as it relates to where carriers can start carving out their liability and avoiding liability.' The ruling said the way the FAIR Plan limits smoke damage coverage to its definition of 'direct physical loss' was a violation of the law, stating that 'this language limits coverage reasonably expected by an insured in a manner which is not conspicuous, plain and clear.' The judge also said it was unlawful that the FAIR Plan required smoke damage to be 'visible to the unaided human eye' or capable of being 'detected by the unaided human nose of an average person' rather than 'the subjective senses of (the insured) or by laboratory testing.' 'Being unable to resort to their own senses or laboratory tests, it is entirely unclear how an insured could determine whether a particular loss is covered or not,' the court decision noted. FAIR Plan spokeswoman Hilary McLean said in a statement that the insurer has been working with the state insurance agency to update its policy language and has already eliminated the so-called sight and smell test. 'Our goal is to continue providing fair and reasonable coverage for wildfire-related losses while maintaining the financial integrity of the FAIR Plan for all policyholders,' McLean said in a statement.
Associated Press
5 days ago
- Business
- Associated Press
California court rules state insurance policy on smoke damage is unlawful
A California judge has ruled the state's bare-bones home insurance program's handling of smoke damage claims is unlawful, a decision that could have wide-ranging implications as insurers increasingly deal with the aftermath of wildfires. Home insurance broadly covers fire damage, but there is a growing dispute over what damage must be covered when flames don't torch the property. The decision Tuesday by Los Angeles Superior Court Judge Stuart M. Rice is a victory for homeowners in a state where the risk of catastrophic wildfires has intensified alongside a brewing home insurance crisis. The specific case involved Jay Aliff, who sued in 2021 over the insurance payout for his house near Lake Tahoe, which was damaged in the November 2020 Mountain View fire. His lawsuit challenged the California Fair Access to Insurance Requirements Plan, or the FAIR Plan, the state's high-risk insurance pool or the last-resort option for those dropped by private insurance companies. With high premiums and basic coverage, the FAIR Plan was designed as a temporary safety net until policyholders could find a more permanent option. Today, it has become the default option for many, with the number of residential policies reaching 550,000 in March, more than double from 2020, state data shows. Reports from other urban wildfires, in which building materials, appliances, cars and more burn at incredibly high temperatures, show increased levels of heavy metals including lead and polycyclic aromatic hydrocarbons (PAHs) such as benzene that are tied to negative health risks. But insurance companies haven't standardized testing for those contaminants. The FAIR Plan has been scrutinized for years over allegations of summarily denying smoke damage claims unless there's proof of permanent physical change, even though the California Department of Insurance has long determined that that threshold is illegal. Aliff's lawsuit claims that FAIR Plan at the time offered a fraction of the money he expected to cover the costs to remediate the damages, citing a partial denial letter that said the fire debris could be cleaned up –- and therefore didn't qualify for coverage as a 'direct physical loss' to the home. 'The things that burn are terrifying like lead, cyanide. It's not possible to get that out with Swiffer,' said Aliff's attorney, Dylan Schaffer, referring to the brand of disposable mops. Schaffer, who is also the attorney in a number of other lawsuits against the FAIR Plan related to the smoke damage issue, said the new court ruling was a game-changer in California insurance law at a time when thousands of homeowners in the recent Palisades and Eaton wildfires are still fighting for coverage. 'It is the most important decision in California insurance law in decades,' Schaffer said. 'It draws a line in the sand as it relates to where carriers can start carving out their liability and avoiding liability.' The ruling said the way the FAIR Plan limits smoke damage coverage to its definition of 'direct physical loss' was a violation of the law, stating that 'this language limits coverage reasonably expected by an insured in a manner which is not conspicuous, plain and clear.' The judge also said it was unlawful that the FAIR Plan required smoke damage to be 'visible to the unaided human eye' or capable of being 'detected by the unaided human nose of an average person' rather than 'the subjective senses of (the insured) or by laboratory testing.' 'Being unable to resort to their own senses or laboratory tests, it is entirely unclear how an insured could determine whether a particular loss is covered or not,' the court decision noted. FAIR Plan spokeswoman Hilary McLean said in a statement that the insurer has been working with the state insurance agency to update its policy language and has already eliminated the so-called sight and smell test. 'Our goal is to continue providing fair and reasonable coverage for wildfire-related losses while maintaining the financial integrity of the FAIR Plan for all policyholders,' McLean said in a statement.
