In recent years wildfire smoke claims have become more than a cottage industry in California and some other states. Policyholders owning buildings outside the area burned by a wildfire contend the smoke from the wildfire has damaged their buildings, in extreme cases requiring the gutting of the interior in order to eradicate smoke and soot from wall cavities.
Last week, a California Court of Appeal affirmed a trial court’s rejection of a smoke claim to an otherwise undamaged home, concluding there was no direct physical loss to insured property because there was no “distinct, demonstrable, physical alteration to property.”
Gharibian v. Wawanesa General Ins. Co., No. B325859 (Feb. 7, 2025), involved a residence in Granada Hills (Los Angeles County) which was about a half mile from the 2019 Saddle Ridge Fire. The home did not burn, but some debris entered the home, and more fell outside including in the policyholders’ swimming pool. They reported a claim to their homeowners insurer, who ultimately paid about $20,000 for professional cleaning, which the policyholders never did, instead cleaning it themselves.
The policyholders sued their insurer, alleging both breach of contract and bad faith claims. The trial court granted the insurer’s motion for summary judgment, relying in part on evidence from the Industrial Hygienist retained by the policy holder who stated that soot and char debris did not cause physical damage, and any ash did not cause physical damage.
The Court of Appeal applied the California Supreme Court’s COVID-19 decision, Another Planet Entertainment, LLC v. Vigilant Ins. Co., 15 Cal.5th 1106 (2024), concluding that that wildfire smoke, like the COVID virus, did not cause a distinct, demonstrable, physical alteration of the policyholders’ property, thus there was no coverage. It also held that the insurer’s payments were not a waiver of its defenses, observing that because insurers often adjust claims for reasons unrelated to their merits, the payments were not an admission, citing a decision from 1988.
Gharibian is a win for the insurance industry, but that does not mean policyholders will abandon wildfire smoke claims. While it’s premature to predict how the policyholder bar will react, there likely will be efforts to distinguish it based upon the factual circumstances of particular claims.
Andrew B. Downs
Bullivant Houser Bailey
Insuralex Exclusive Member in California and Washington
