California Judge Rules FAIR Plan Unlawful
1. After a decade-long battle, the Los Angeles Superior Court ruled:
The FAIR Plan required that damage must be “evidenced by permanent physical changes” to be considered a covered loss. The court found this unlawfully restrictive:
FAIR Plan’s version denied coverage for damages that didn’t result in permanent, visible changes—even if dangerous substances were embedded in a structure.
The judge concluded this narrowed definition reduced coverage below the legal minimum, in violation of Insurance Code §2070.
2. Visibility & Smell Requirements
The policy also limited smoke damage claims to what could be seen or smelled by an “average” person—explicitly excluding lab tests. The court determined:
This approach contradicts the California Supreme Court’s Another Planet Entertainment decision, which clarified that microscopic and persistent contaminants can constitute physical loss.
What the Court Declared
The court issued a formal declaration that:
The FAIR Plan’s definition of “direct physical loss” is less favorable than state law permits.
Its restrictions violate the reasonable expectations of insured homeowners.
Key policy provisions are unenforceable, especially those limiting coverage to permanent or visible damage only.
Dispute resolution procedures relying on unlawful definitions are also invalid to that extent.
What This Means for Homeowners
This decision opens the door for homeowners to challenge denied or underpaid claims where FAIR Plan relied on:
Visibility-only standards
Denials due to lack of “permanent” damage
Exclusion of lab-tested contamination
Kerley Schaffer LLP is currently advising clients impacted by wildfire smoke claims—particularly those denied coverage for ash, soot, and microscopic toxins.
Take Action Now
If your FAIR Plan claim was denied or partially denied, after the ruling you:
May be entitled to compensation
Your policy may have been unlawfully restrictive
You may be able to reopen your claim
Contact Kerley Schaffer LLP for a free consultation. We can review your documentation, interpret the policy language in light of this ruling, and help you determine next steps.