Elizabeth Doyle | Zelle
The January 2025 Southern California wildfires destroyed more than 18,000 structures, burned nearly 50,000 acres, and caused the evacuation of more than 200,000 people. One year later, thousands of residents of Altadena and Pacific Palisades whose homes did not burn have nevertheless not returned because they claim their homes are uninhabitable due to toxic smoke exposure. Numerous residents report that their insurers have denied their claims for alternative living expenses because the homes are structurally intact and “look pristine.” [1]
California Insurance Code Section 2071 establishes the standard form of fire insurance policies within the state. The standard fire policy provides coverage for “all loss by fire.” Ins. Code § 2071(a).) The Standard homeowners form generally covers “direct physical loss or damage” to covered property, unless excluded. Under California law, to trigger coverage, “there must be some physicality to the loss of property – e.g. a physical alteration, physical contamination, or physical destruction.”[2] Whether smoke, soot, and/or ash qualify as “direct physical loss” under a first party property policy is one of the primary disputes between policy holders and insurers adjusting fire loss claims. Although the body of case law on the smoke damage issue is likely to develop further over the next few years, there are currently very few state and federal appellate decisions analyzing whether smoke exposure qualifies as “direct physical loss.”
To assist the development of strategies for handling fire loss claims in California, we examine the relevant cases decided in 2025 concerning wildfire smoke damage claims:
Bottega, LLC v. National Surety Corporation, No. 21-cv-03614-JSC (N.D. Cal. Jan. 10, 2025) (“Bottega”)
On January 10, 2025, as the Los Angeles wildfires would burn for the next twenty days, U.S. District Court Judge Jacqueline Corley issued a summary judgment ruling in a suit brought by a Napa Valley restaurant that suffered business income losses as a result of the 2017 Napa / North Bay Fires. Although the fires did not burn the restaurant itself, the plaintiff restaurant claimed that smoke, soot, and ash “inundated” the premises, forcing it to close for one day after the fire and for a week shortly thereafter. Upon reopening, despite the employees’ daily cleaning of the wall coverings and upholstery, and eventually replacing the upholstered surfaces, the restaurant could only use one-third of its seating due to the ongoing smell of smoke. The restaurant sought coverage under its commercial property insurance policy, which covered losses due to “direct physical loss or damage.”
Plaintiff’s insurer, National Surety, denied coverage on the grounds that because the restaurant was still structurally intact, it had not suffered a “physical loss” as required by the policy. In the ensuing coverage litigation, the District Court denied National Surety’s motion for summary judgment, finding that: (i) the smoke and soot contamination rendered the property unfit for normal use, meeting the standard for “direct physical loss;” and (ii) National Surety’s responses to requests for admissions confirmed that the premises had suffered smoke damage, undermining its “no direct physical loss” argument.
The court rejected National Surety’s reliance upon COVID-19 property insurance cases, pointing out that the courts in those cases distinguished COVID-19, described as a “virus that can be disinfected,” from “noxious substances and fumes that physically alter property.”[3] The court reasoned: “Whereas a virus is more like dust and debris that can be removed through cleaning, [citations] smoke is more like asbestos and gases that physically alter property.”
Although Bottega is a federal trial court decision and thus not binding precedent, the court’s focus on “physical alteration” beyond what can be wiped away offers a window into how other trial courts in California may analyze the “direct physical loss” question in the context of ash, soot and smoke.
Gharibian v. Wawanesa General Insurance Co. (2025) 108 Cal.App.5th 730 (“Gharibian”)
On February 7, 2025, the California Court of Appeal issued a decision arising from homeowners in Granada Hills, California who sought coverage after the 2019 Saddle Ridge Fire deposited wildfire debris around their home, located a half mile from the burn zone. Although the fire did not reach the plaintiff’s property, the exterior of their home was covered in soot and ash, and plaintiffs asserted that smoke odors lingered within the home.
Plaintiff’s homeowners’ insurer, Wawanesa, paid $23,000 for professional cleaning services, which plaintiffs did not use. Wawanesa eventually denied coverage, taking the position that there was no “direct physical loss to property” because the home was structurally intact and that removable debris did not qualify.
Over the course of the litigation, the plaintiff insureds’ expert testified that while soot and ash were present on the property, soot does not physically damage the property, and ash only causes damage if left on metal or vinyl and exposed to water. Plaintiff’s expert further testified that “the home could be fully cleaned by wiping the surfaces, HEPA vacuuming, and power washing the exterior.”
On summary judgment, the trial court concluded, and the Court of Appeal affirmed, that Wawanesa did not breach the insurance contract because the plaintiffs did not have a covered claim. The court ruled that, as established by the plaintiffs’ own experts, wildfire debris did not ‘alter the property itself in a lasting and persistent manner’ … all evidence indicates that the debris was ‘easily cleaned or removed from the property’.”[4]
Notably, the Gharibian decision was based on Plaintiff’s own evidence that the debris could be cleaned up through basic cleaning methods and the property thus restored to its pre-loss condition. It is clear the nature of the impact the soot, ash and smoke have on the property will be critical to a determination of whether there was covered “physical loss or damage.” The decision underscores that it is the insured’s burden to prove a loss comes within the scope of coverage. As applied to smoke, a homeowner whose property experiences smoke exposure and debris must demonstrate that the debris caused “physical alteration of property.”
Aliff v. California Fair Plan Association, Los Angeles County Superior Court Case No. Case No. 21STCV20095 (“Aliff”)
The California Fair Plan (“the Fair Plan”) is a state-mandated, last-resort insurance program providing basic fire coverage for California property owners unable to get homeowners insurance from traditional carriers.
In 2017, the Fair Plan redefined “direct physical loss” in the Fair Plan policy to require “permanent physical changes” to the property and changed the policy’s definition of smoke damage to require that the damage be “visible to the unaided human eye” or “detected by the unaided human nose of an average person, and not by the subjective senses of [the insured] or by laboratory testing.”
In 2021, plaintiff Jay Aliff filed a class action lawsuit seeking a declaratory judgment that the Fair Plan’s policy language violated Insurance Code Section 2071.
In June 2025, Los Angeles County Superior Court Judge Stuart Rice granted Aliff’s motion for summary judgment. Judge Rice ruled that the Fair Plan policy requirement that all physical loss be “permanent” violated Insurance Code Section 2071 because it narrowed the coverage required in the Section 2071 standard form, which requires broader coverage for all “loss by fire.”
Citing the California Supreme Court decision in Another Planet Entertainment v. Vigilant Insurance Co., the court emphasized that physical loss does not require property damage to be permanent; only that the property be demonstrably altered or changed.[5]
The court also rejected the Fair Plan policy’s changed definition of “smoke damage,” which required that the damage be “visible to the unaided human eye” or “detected by the unaided human nose of an average person, and not by the subjective senses of [the insured] or by laboratory testing.” The court ruled that requiring sensory perception, rather than laboratory testing, in order to satisfy the policy definition was inconsistent with Another Planet, which held that “direct physical loss or damage” to property does not have to be visible. Because the changed definition of “smoke damage” resulted in less favorable coverage than required by the standard form policy in Section 2071, the court concluded the FAIR Plan’s smoke damage definition was unlawful.
The Fair Plan did not file a Notice of Appeal of the ruling and, based on the court’s minute orders contained in the Los Angeles County Superior Court docket for this matter, the parties reached a settlement in November 2025.
Key Takeaways
Based on the foregoing, it is important when adjusting ash, soot and smoke claims to evaluate whether the ash, soot and smoke physically altered property or if it can simply be cleaned. This will likely be driven by expert testing and opinions.
[1] See, e.g. Why some LA fire victims sometimes wish their homes were destroyed – NBC Los Angeles nbclosangeles.com/news/local/toxic-homes-eaton-palisades-fire-insurance-ricardo-lara/3829657
[2] Inns-by-the-Sea v. California Mutual Ins. Co., 71 Cal.App.5th 688, 707 (2021)
[3] Bottega, LLC v. National Surety Corporation, 2025 WL 71989 *4.
[4] Gharibian v. Wawanesa General Insurance Co. (2025) 108 Cal.App.5th 730, 739.
[5] Another Planet Entertainment v. Vigilant Insurance Co., 15 Cal.5th 1106 (2024)
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