California Fair Plan Must Cover Smoke Damage

Wildfire smoke leaves behind far more than charred trees and air pollution—it deposits a silent, invisible layer of toxins that can linger in homes long after the flames are gone. These particles, often too small to see, include dangerous substances such as lead, arsenic, benzene, formaldehyde, and volatile organic compounds (VOCs). Once smoke enters a property, it embeds itself deep within insulation, HVAC systems, wall cavities, flooring, furniture, and even clothing, posing long-term threats to both health and property value.

Despite growing scientific consensus around the seriousness of this invisible damage, the California FAIR Plan—the state’s insurer of last resort—routinely denied claims unless the smoke damage could be seen or smelled. Homeowners who submitted lab-verified contamination reports from professional remediators were often told that the presence of microscopic smoke particles did not qualify as “physical loss.”

That policy has now been declared illegal.

In the landmark case of Jay Aliff v. California FAIR Plan Association, Judge Stuart M. Rice of the Los Angeles Superior Court ruled on June 24, 2025, that the FAIR Plan’s restrictive interpretation of smoke damage violated California insurance law. Specifically, it failed to meet the minimum coverage requirements under Insurance Code §2071, which mandates adherence to the state’s Standard Form Fire Insurance Policy.

🔍 Why the FAIR Plan’s Policy Language Failed

1. Violation of State-Mandated Coverage
   The FAIR Plan’s policy from 2020 to 2022 stated that smoke damage had to be “evidenced by permanent physical changes” to the property. This phrase effectively excluded lab-confirmed contamination unless there was visible staining or a lingering odor—standards that are not legally enforceable under California law.

2. Conflict with Scientific Evidence
   The court emphasized that scientifically verified smoke damage—such as lab reports showing particulate matter, VOCs, or carcinogens—is valid physical loss, even when invisible to the eye. Modern remediation protocols rely on testing, not just observation, to detect harm.

3. Ambiguous, Misleading Language
   Judge Rice noted that the language was not “conspicuous, plain and clear,” as required by the California Supreme Court in State Farm v. Jacober. Most policyholders would reasonably expect that insurance covers contamination caused by wildfire smoke—especially when backed by professional reports.

“The 2020 and 2022 versions of the FAIR Plan policy are unlawful because they purport to provide less coverage than required by the standard form fire insurance policy...”
— Judge Stuart M. Rice, June 24, 2025 ruling

How This Impacts California Homeowners

This ruling is expected to have wide-reaching effects across California, where wildfires have become an annual reality and over half a million FAIR Plan policies are currently active. Here’s what it means for policyholders:

• Invisible smoke damage is now legally recognized.
  Claims for contamination confirmed by environmental testing, even without visible evidence, must be covered under state-mandated fire insurance policies.

• You may be entitled to reimbursement.
  If you paid for professional smoke cleanup—such as HEPA filtration, HVAC replacement, or surface remediation—you may now reopen your claim and seek retroactive payment.

• Insurers can be held accountable.
  The ruling opens the door for bad faith insurance lawsuits, class actions, and complaints against insurers that denied coverage based on these unlawful standards.

• Policy language may change statewide.
  The FAIR Plan has begun removing its “sight-and-smell” exclusions in newer policies, but this ruling ensures that past language is no longer enforceable.

Legal Help Is Available

Navigating a denied smoke damage claim can be overwhelming, especially when dealing with complex policy language and mounting cleanup costs. That’s where Kerley Schaffer LLP comes in.

Our firm has been at the forefront of litigation challenging unfair insurance practices—especially related to wildfire damage, smoke contamination, and policyholder rights. We were among the first to identify the illegality of these exclusions and have worked closely with environmental scientists, remediation experts, and legal partners to fight for fair treatment.