California FAIR Plan Shortchanged Fire Victims
On June 25, 2025, a Los Angeles Superior Court judge issued a landmark ruling that the California FAIR Plan Association—the state’s insurer of last resort—violated insurance law by denying smoke damage claims from wildfire victims based on overly narrow standards. The case has far-reaching implications for thousands of homeowners across California who were denied or underpaid for fire-related contamination that wasn’t “visible” or “detectable by smell.”
This blog post explains what the court decided, why the FAIR Plan’s policy language was deemed illegal, and how Kerley Schaffer LLP is helping homeowners pursue long-overdue compensation.
What Was the Case About?
The lawsuit, filed by policyholder Jay Aliff, challenged the FAIR Plan’s refusal to pay for professional smoke remediation after wildfires damaged homes with toxic particles, ash, and microscopic contaminants. FAIR Plan argued that unless the smoke damage could be seen or smelled, it wasn’t covered under their definition of “direct physical loss.”
But the judge found this definition illegally restrictive, noting it falls short of California’s Standard Form Fire Insurance Policy, which insurers are required to follow under California Insurance Code §2071.
Key Findings from the Court
1. Unlawful Policy Language
The FAIR Plan’s refusal to cover smoke damage unless it was “visible” or “smelled” was ruled noncompliant with state law. The court found that:
Fire-related smoke damage can still cause serious harm even if not visible.
Policies must honor microscopic contamination, especially when lab tests confirm the presence of hazardous materials.
2. Conflict with State Law and Legal Precedent
The court cited several important precedents:
Another Planet Entertainment v. Vigilant Insurance, which confirms that contamination may constitute “physical loss” even without visible damage.
State Farm v. Jacober, which requires all policy exclusions or limitations to be conspicuous, plain, and clear—something FAIR Plan’s “sight-and-smell” standard was not.
3. Impact on Thousands of Policyholders
This ruling affects countless California homeowners impacted by wildfires—many of whom paid out-of-pocket for cleanup services because FAIR Plan denied or limited their claims. According to court filings, FAIR Plan received over 25,000 smoke-related claims from Los Angeles County’s 2020 wildfires alone.
Why This Ruling Matters
For years, FAIR Plan systematically denied claims unless a third-party appraiser could see or smell smoke. However:
Many smoke contaminants—such as lead, arsenic, and polycyclic aromatic hydrocarbons (PAHs)—pose serious health risks even if invisible.
Professional cleanup often includes replacing insulation, ductwork, or drywall—costs that policyholders were forced to absorb.
The ruling sends a clear message: insurers cannot deny coverage for scientifically proven damage simply because it’s not visible to the naked eye.
Kerley Schaffer LLP’s Role
Kerley Schaffer LLP, a California litigation firm specializing in insurance recovery and bad faith claims, has played a key role in advancing this issue in the courts. Since 2021, the firm has:
Represented homeowners across wildfire zones, including Los Angeles, Napa, Sonoma, and the Sierra Foothills
Filed bad faith lawsuits against the FAIR Plan for denying legitimate claims
Partnered with Edelson PC to pursue unfair competition law violations
The firm is now assisting wildfire victims who were previously denied smoke damage compensation, especially when lab testing or expert reports were ignored by insurers.
What You Should Do Next
If you filed a claim with the FAIR Plan that was denied, reduced, or ignored—especially if the basis was lack of visible smoke damage—you may now have the legal right to reopen your claim or seek damages.
Here’s how to get started:
1. Gather Documentation
Collect your:
FAIR Plan policy documents
Claim denial letters or explanation of benefits
Environmental or lab test results
Invoices for cleaning, remediation, or repairs
2. Reassess Your Claim
You may have a valid argument that your damage was wrongfully denied under an illegal policy restriction. This ruling supports using scientific and lab evidence—not just sight or smell—to validate loss.
3. Contact Kerley Schaffer LLP
Kerley Schaffer LLP is currently offering consultations to assess whether your wildfire smoke claim qualifies for:
Claim reactivation
Full or partial reimbursement
Litigation for bad faith or unlawful denial
Final Thoughts
This ruling represents a turning point in California wildfire insurance law. It reinforces the rights of homeowners to receive full coverage for invisible but harmful damage, and challenges long-standing denial practices by insurers like the FAIR Plan.
If you believe your fire-related claim was unfairly denied, the time to act is now.