Where There's Fire, There's Smoke ' And Smoke Damage Disputes

• Published date: 21 May 2025
• Subject Matter: Insurance, Insurance Laws and Products
• Law Firm: Wilson Elser Moskowitz Edelman & Dicker LLP
• Author: Ms Shannon L. Santos and David Simantob

In January 2025, dozens of wildfires ripped through Los Angeles in a way no one could have imagined. We all spent the week in front of televisions waiting to see which direction the winds would take the fires. Those not forced to officially evacuate had bags ready to go in case a new fire flared closer to home. And while the City braced for decades of rebuilding efforts, the insurance coverage attorneys waited for the inevitable coverage disputes to begin.

The initial response to the wildfires was not likely to generate disputes between the insurers and insureds. According to data from the California Department of Insurance (DOI), as of January 30, 2025, out of 31,210 claims related to the fires, 14,417 were immediately partially paid to the tune of $4.2 billion. Within a week, by February 5, 2025, the number of claims increased to 33,717 with 19,854 partially paid in the amount of $6.9 billion.¹

During this time, insurers were following their modified obligations under the California Regulations given the DOI's emergency declaration of January 9, 2025, which imposed certain additional obligations on the insurers for a total loss:

• The insurer must offer an immediate payment of at least 30% of the contents policy limit up to $250,000 (Cal. Ins. Code ' 10103.7).
• An insured does not need to use the insurer's inventory form and does not need to itemize the contents (Cal. Ins. Code ' 2061(a)(2)(3)).
• At an insured's request, the insurer must advance at least four months of additional living expenses (Cal. Ins. Code ' 2061(a)(1)), and the insured is entitled to at least 36 months of ALE coverage (Cal. Ins. Code ' 2060(b)(1)).
• Neither an insured nor an insurer can demand appraisal without the other's consent (Cal. Ins. Code ' 2071).
• An insurer cannot cancel or refuse to renew a residential property policy in a zip code adjacent to a fire perimeter based solely on the wildfire location (Cal. Ins. Code ' 675.1(b)(1)).
• The insurer must provide a 60-day grace period for premium payments (Cal. Ins. Code ' 2062).

While the total-loss claims were not going to spark much controversy, it was only a matter of time before the smoke damage claims ignited and the insurance world incurred an onslaught of coverage disputes.

Legal Decisions Regarding Smoke Damage

The question of whether smoke damage constitutes "property damage" is an ongoing issue in California. The matter was litigated heavily during the COVID-19 pandemic where businesses frequently claimed "property damage" from the virus. Courts in California generally found that COVID-19, without more, did not constitute "property damage." Another Planet Entertainment, LLC v. Vigilant Ins. Co., 15 Cal. 5th 1106, 1117 (2024). In the weeks following the start of the 2025...