California FAIR Plan Smoke Denial Illegal

A Los Angeles Superior Court judge recently ruled that the California FAIR Plan—the state-backed “insurer of last resort”—illegally denies coverage for wildfire smoke damage when victims are forced to remediate their homes themselves. This decision marks a major turning point in wildfire insurance litigation, empowering homeowners who previously had no recourse.

Background: The Case and Its Stakes

For decades, policyholders forced onto the FAIR Plan after being dropped by private insurers found themselves trapped. The plan’s policy limited coverage only when smoke or ash was “visible” or “detectable by smell”, denying reimbursement for professional cleanup—even when toxic substances like lead and asbestos were confirmed through lab analysis. Thousands of homeowners, including Etta from Altadena, went to work themselves, some spending as much as $80,000–$100,000, only to have their claims denied.

Court Findings

The judge determined that the FAIR Plan’s denial of professional remediation:

• Exceeded legal authority by ignoring state-mandated benefits

• Violated California Insurance Code by excluding coverage simply because damage wasn’t immediately detectable

• Lowballed or delayed settlements, which constitutes bad-faith practices

• Enabled through systematic underpayment and denial patterns by an insurer influenced by its governing department

Real-Life Consequences

• Etta and her family worked for months in hazmat gear, unsure whether their home was safe. She later received a denial letter despite a hygienist identifying lead contamination requiring professional remediation.

• Community advocates like Harvey Rosenfield have reported the FAIR Plan’s long history of “denying, delaying, reducing, low‑balling these claims.”

• Independent agents confirm the FAIR Plan’s refusal to follow guidelines, while the Department of Insurance appeared powerless to enforce the law—until now, when the court intervened.

Implications for Homeowners

This ruling disrupts the FAIR Plan's restrictive approach and opens multiple avenues:

1. Reopening Denied Claims
   Homeowners who paid for cleanup—especially with confirmed toxic exposure—can file new claims or challenge prior denials.

2. Tidal Wave of Litigation
   Thousands of prior claimants could now participate in class actions or bad-faith lawsuits, seeking full restitution.

3. Agency Reforms
   The decision forces the Plan and regulators to harmonize policy language with the California Insurance Code, ensuring policies cover professional remediation when scientifically justified.

Kerley Schaffer LLP’s Role

Attorney Dylan Schaffer of Kerley Schaffer LLP, who successfully argued the case, emphasized:

“California FAIR Plan has denied thousands of claims and underpaid many more.”

The firm is now:

• Identifying clients whose claims were unfairly denied

• Preparing bad-faith and unfair-practices litigation targeting the FAIR Plan and its decision-makers

• Co-leading legal efforts to reform industry-wide smoke damage evaluation practices

What You Can Do Next

1. Review Past Claims
   Check if your claim was denied due to lack of visible smoke or smell.

2. Collect Documentation
   Gather lab reports, contractor cleanup invoices, and correspondence related to your FAIR Plan experience.

3. Contact Kerley Schaffer LLP
   Schedule a free case review to explore reopening claims, pursuing compensation, or joining litigation.

Why This Matters

This court decision sets a legal precedent in California wildfire coverage, mandating:

• Coverage for scientifically confirmed smoke damage

• Compliance with Insurance Code benefits

• Legal accountability for insurers minimizing their financial responsibilities

With wildfire exposure increasing, this ruling protects homeowners against unlawful exclusion tactics.