FAIR Plan Illegally Limits Smoke Damage Coverage
A June 25, 2025 ruling by Los Angeles County Superior Court Judge Stuart M. Rice determined that California’s FAIR Plan—covering over 570,000 homes—is unlawfully undercompensating wildfire victims by restricting smoke damage reimbursement only to losses that are visible or smelled. This restrictive policy violates California Insurance Code and fails to meet legal standards for fire-loss coverage. It’s a major victory for homeowners and advocates, who say it could unlock hundreds of millions in compensation for those denied full remediation. Key Ruling Highlights
Expanded Definition of “Loss by Fire”
California law mandates insurance must cover all fire-related losses, including smoke damage. Judge Rice criticized the FAIR Plan’s narrow focus—exclusive to damage an average person can detect—as inconsistent with this standard.
Illegal Sight-and-Scent Requirement
Restricting coverage to losses visible to the eye or detectable by smell unfairly limits policyholder expectations and legally fails to qualify as “conspicuous, plain and clear” coverage language.
Systemic Underpayment Confirmed
Since 2012, FAIR Plan denied or limited thousands of smoke damage claims, including some from recent Los Angeles wildfires. Judge Rice’s ruling forces insurers to reassess and issue overdue payouts.
Wider Implications
Health & Structural Risks
Smoke damage often involves microscopic toxins like benzene, lead, and PAHs that require deep cleaning—not just surface wiping. FAIR Plan’s restrictive policy ignored this, according to United Policyholders and expert testimony .
Regulatory Action Underway
California Insurance Commissioner Ricardo Lara has launched a task force to establish statewide standards for smoke-damage testing and compensation. The FAIR Plan abolished the problematic test last year, but regulators stress enforcement is still needed.
A Win for Policyholder Rights
Attorney Dylan Schaffer calls this ruling a “game-changing, first-of-its-kind decision,” likely to influence how every property insurer addresses smoke damage claims in California.
What Homeowners Should Do
Review Past Denials
If your FAIR Plan claim was denied for lack of visible smoke or smell, this ruling might allow you to reopen or appeal it.Gather Documentation
Secure air quality reports, lab test results, professional remediation invoices, and correspondence citing “sight/scent” exclusions.Seek Legal Help
Kerley Schaffer LLP is offering free analysis and claim support. Our team can assess potential for reopening claims, reimbursement, or filing bad-faith litigation.
Why This Ruling Matters
It sets a binding legal precedent—insurers can no longer refuse coverage for scientifically verified, non-olfactory smoke damage.
It underscores the law’s demand for clear, plain policy language and protects homeowner expectations.
It empowers regulators and attorneys to enforce accountability in wildfire insurance practices.
If smoke damaged your home during a wildfire and your claim was denied or underpaid by the FAIR Plan, now is the time to act. Contact Kerley Schaffer LLP for a free case review—get the compensation you were guaranteed under the law.