A burned home destroyed by the Eaton Fire that started on Jan. 7 in Altadena.
Los Angeles, California – A California judge has ruled that the state’s last-resort home insurance program, the FAIR Plan, has unlawfully restricted coverage for smoke damage, a decision with potentially far-reaching effects as catastrophic wildfires become a permanent feature of the state’s landscape. Los Angeles Superior Court Judge Stuart M. Rice, in a ruling issued Tuesday, sided with a Lake Tahoe-area homeowner who sued after the FAIR Plan partially denied his claim following the 2020 Mountain View fire.
At the heart of the dispute is what constitutes “direct physical loss” when flames do not directly consume a house, but toxic smoke infiltrates walls, insulation, and ventilation systems. For years, the FAIR Plan has applied what critics called an unreasonably narrow standard, only acknowledging damage that was visible or could be detected by an average person’s sight or smell, ignoring more subtle but hazardous contamination.
The FAIR Plan was created as a stopgap for homeowners unable to secure insurance on the private market, but has since become a default option for more than 550,000 residential policyholders — a number that has more than doubled since 2020, reflecting the exodus of commercial insurers from high-risk fire zones. As wildfires burn hotter and closer to neighborhoods, Californians face not just structural losses but persistent smoke infiltration, which can leave behind heavy metals, lead, benzene, and other toxins that pose serious health hazards.
In the lawsuit, Jay Aliff argued that FAIR Plan’s denial of most of his claim left him unable to properly remediate contamination that could not simply be “cleaned up” with basic household products. His attorney, Dylan Schaffer, said, “The things that burn are terrifying like lead, cyanide. It’s not possible to get that out with Swiffer.”
Judge Rice agreed, finding that requiring smoke damage to be visible or smellable violated California law. The ruling described FAIR Plan’s approach as unreasonably restrictive and inconsistent with what policyholders would expect from their coverage. The court also emphasized that forcing homeowners to rely on their “unaided” senses rather than professional laboratory testing was unworkable and unfair.
The FAIR Plan’s spokesperson said the program has already started eliminating that so-called “sight and smell test” in cooperation with state regulators. California Insurance Commissioner Ricardo Lara, in a March bulletin, demanded that insurers investigate claims thoroughly, including paying for lab testing if needed.
Still, many homeowners report difficulty getting claims paid, particularly as private carriers and the FAIR Plan struggle to cope with wildfire risks that have intensified alongside the climate crisis. Dave Jones, director of the Climate Risk Initiative at UC Berkeley, noted that modern urban wildfires burn at extreme temperatures, releasing dangerous toxins that cannot simply be wiped away.
As thousands of homeowners in places like the Palisades and Eaton fires continue to press for coverage, Judge Rice’s decision could reshape how Californians recover not just from flames, but from the toxic aftermath left behind.
