Judge rules against major insurance provider denying homeowners' claims: 'It draws a line in the sand'

After wildfires, homeowners face health risks from a surprising source but often struggle to get one major insurer to approve their claims. A California judge has issued a ruling on a lawsuit filed by Jay Aliff in 2021 that could help them recover more quickly.

The Associated Press reported that Los Angeles Superior Court Judge Stuart M. Rice determined that the Golden State's FAIR Plan — a last-resort option for homeowners dropped by private insurers — was unlawfully handling claims of smoke damage.

Like other parts of the world, California is experiencing more frequent and intense wildfires, with the area burned each year increasing, according to the state's Air Resources Board.

This pattern is directly connected to a warming climate, primarily driven by pollution from dirty fuels, and it has caused private insurers to increase premiums to unaffordable rates or withdraw from high-risk areas altogether, leaving people dependent on last-resort state-run plans.

For years, critics of California's FAIR Plan have pointed to how it denies claims without proof of permanent damage, leaving homeowners with hefty bills as they attempt to limit exposure to substances in smoke damage such as benzene, a volatile organic compound linked to cancer.

"The things that burn are terrifying like lead, cyanide. It's not possible to get that out with Swiffer," said Dylan Schaffer, an attorney representing Aliff, who filed his suit after the FAIR Plan said fire debris from the 2020 Mountain View fire wasn't a "direct physical loss" and therefore couldn't be covered.

However, the California Department of Insurance has long ruled that this is illegal, according to the AP report, as insurers lack a standardized method for testing contaminants.

"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 said.

"It is the most important decision in California insurance law in decades," Schaffer told the AP of the judge's ruling on the 2021 suit, as thousands of homeowners are still fighting to obtain coverage and rebuild their lives after the Palisades and Eaton wildfires in January.

"It draws a line in the sand as it relates to where carriers can start carving out their liability and avoiding liability," Schaffer added.

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FAIR Plan spokeswoman Hilary McLean said the insurer is updating its policy language after the judge ruled it was illegal for the plan to require smoke damage to be "visible to the unaided human eye" or "detected by the unaided human nose of an average person" to be covered.

"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, per the AP.

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