California Court Rules Fair Plan’s Smoke Damage Policy Illegal

Los Angeles, CA – In a major win for California homeowners, Judge Stuart Rice of the Los Angeles Superior Court has ruled that the California Fair Plan Association’s smoke damage policy is illegal because it provides less coverage than required by state law.

The case, Jay Aliff v. California Fair Plan Association (Case No. 21STCV20095), arose after Jay Aliff, a Mono County resident, suffered direct physical loss to his property during the Mount View Fire in November 2020. The California Fair Plan denied his smoke damage claim and told him he would first need an appraisal of the damage — an extra hurdle not found in California’s statutory standard fire policy.

Aliff alleged that the Fair Plan’s policy unlawfully reduced fire coverage by distinguishing between fire damage and smoke damage, even though California Insurance Code Section 2071 mandates that the Standard Form Fire Insurance Policy cover “all loss by fire” without such a distinction.

Judge Rice agreed, finding that the Fair Plan’s definition of “direct physical loss” had been changed “for the worse” so that it now fell below the statutory minimum coverage required by law. In short, the Fair Plan’s policy no longer tracked the standard form policy — a violation of the Insurance Code.

This ruling means the Fair Plan cannot enforce policy language that limits or conditions coverage for smoke damage differently than for other fire losses. For homeowners who rely on the Fair Plan — often because they cannot obtain insurance elsewhere — this is a significant affirmation of their right to full statutory coverage.

Bottom Line: The decision will have far-reaching effects, potentially invalidating similar restrictive language in other Fair Plan policies and opening the door for denied claims to be revisited.

If you should have any questions or are in need of further information, please call the Law Offices of Timothy D. McGonigle for a free confidential consultation today (800) 713-5260!