Judgment Expands Smoke Insurance Coverage

On June 27, 2025, Los Angeles Superior Court Judge Stuart M. Rice issued a landmark ruling declaring that the California FAIR Plan’s policy—requiring smoke damage to be visible or detectable by smell—violates state insurance law. The lawsuit, filed by policyholder Jay Aliff over smoke contamination during the 2020 Mountain View Fire, highlighted the Plan’s refusal to honor laboratory-verified, non-visible smoke damage. This is being called “the most important decision in California insurance law in decades.”

The Legal Backdrop

• Unlawful Limitation on “Direct Physical Loss”:
  Judge Rice found that FAIR Plan’s reliance on subjective “sight-or-smell” standards and its dismissal of lab results restricts coverage below what California’s Standard Form Fire Policy requires

• Consumer Expectations Undermined:
  The ruling emphasized that policy language must be “conspicuous, plain and clear.” By excluding lab-confirmed damage, FAIR Plan misled policyholders over what constituted a covered loss.

• Invisible Hazard Now Legally Recognized:
  Smoke particles may contain lead, benzene, cyanide, PAHs, and other toxins that are not visible or detectable by smell but pose serious health/weather-related risks.

Why This Ruling Matters

1. Extensive Relief for Homeowners:
   With more than 550,000 FAIR Plan policies in force (double the number since 2020), many denied or underpaid smoke claims can now be reopened and pursued

2. Health and Safety at Stake:
   Invisible smoke contamination threatens respiratory and structural health. Coverage for professional mitigation—air filtration, hazardous-material testing, replacement of affected materials—is now justified.

3. Insurer Accountability:
   The ruling challenges outdated industry practices and signals that insurers may no longer sidestep coverage obligations with narrow policy language—especially amid increasing wildfire risks.

4. Policy Reform Likely:
   FAIR Plan has already removed the “sight-and-smell” test and is revising policy language in consultation with the California Department of Insurance.

Kerley Schaffer LLP’s Role

Attorney Dylan Schaffer, representing Jay Aliff and other policyholders, described the decision as a game-changer in insurance law, marking a significant shift in how insurers can define their coverage obligations.

Kerley Schaffer LLP continues to:

• Litigate FAIR Plan and other insurer bad-faith claims

• Advocate for statewide reforms in wildfire insurance coverage

• Support homeowners in reopening denied claims and seeking compensation

What You Should Do

If your home was affected by wildfire smoke and your claim was denied due to lack of visible or olfactory evidence:

1. Review your denial documentation for references to FAIR Plan’s restrictive standards.

2. Gather evidence such as lab reports, air-quality testing, contractor cleanup invoices, and environmental assessments.

3. Contact Kerley Schaffer LLP for a free review to determine if you can reopen the claim or pursue reimbursement.

This ruling empowers you with a legal pathway to pursue proper coverage and remediation costs.

Final Thought

This ruling redefines the insurance landscape in California—smoke damage is now fully reimbursable, regardless of visibility. If you’ve paid out-of-pocket for smoke cleanup or were denied coverage, Kerley Schaffer LLP is here to help you secure the relief you are legally owed.