California Department of Insurance Bulletin No. 20257
California Department of Insurance Bulletin No. 20257 ("Insurance Coverage for Smoke Damage and Guidance for Proper Handling of Smoke Damage Claims for Properties Located in or near the California Wildfire Areas"), issued March 7, 2025 provides that Coverage for Smoke Damage to Property May be Covered Under Homeowner’s Policies
🧾 Key Takeaways
1. Smoke Damage Should Be May Under Homeowner’s Policies
The Bulletin clarifies that smoke damage may be covered under insurance policies insuring against “direct physical loss of or damage to” property, as reaffirmed by the California Supreme Court in Another Planet Entertainment, LLC v. Vigilant Insurance Co. (2024), which confirmed that damage need not be structural or visible, just impairment to property.
The appellate decision in Gharibian v. Wawanesa (2025) should not be interpreted to categorically deny coverage for all smoke damage—it applied only to the specific facts at issue (ash/soot easily cleaned without physical alteration) .
2. Insurer Obligations & Investigative Standards
Insurers must follow California Insurance Code § 790.03(h) and Fair Claims Settlement Practices Regs § 2695.7(d). This requires prompt, fair, and equitable settlement efforts and objective, thorough investigations—without shifting investigation costs to policyholders
It is unreasonable to deny a smoke damage claim without conducting an appropriate investigation, or to require policyholders to pay for testing themselves. If professional testing is needed, insurers are expected to arrange and pay for it.
3. Low Cost Testing & Health Considerations
As a first step, insurers are encouraged to offer commercially available at-home test kits (e.g. for asbestos or contaminants). If results suggest further concern, full professional remediation should be initiated and paid for by the insurer.
The Bulletin highlights that wildfire debris can contain toxic substances—including asbestos, heavy metals, and chemical residues—with health risks to occupants unless properly remediated.
4. Enforcement & Oversight
All insurers—including the California FAIR Plan—are subject to the Bulletin’s expectations. The FAIR Plan has faced increasing scrutiny and enforcement actions for its restrictive smoke damage policies, including recent legal findings deeming its "sight and smell" coverage threshold improper.
Regulatory pressure is expanding: The Department has initiated legal action and is monitoring carriers closely to ensure compliance with Bulletin 20257 .
⚖️ What This Means for Policyholders
Each claim is fact-specific. Even where ash or soot is present, coverage may apply if there’s evidence of actual impairment—not just visible grime.
Insurers must investigate thoroughly and pay for necessary tests, not require you to.
Low-cost test kits may be used initially, but deeper evaluation (e.g. lab testing) should follow where warranted.
If your insurer denies your smoke damage claim without proper investigation or requires you to cover testing costs, that may violate CDI guidelines—and you can escalate to the California Department of Insurance.
🧩 Legal Context & Broader Impact
Recent court rulings, especially Another Planet (2024) and Gharibian (2025), created confusion about coverage. Bulletin 20257 resolves this by restating that smoke damage can be covered, depending on the policy language and factual proof, and not barred as a matter of law
The regulatory action against the FAIR Plan—particularly over its reliance on visual or olfactory detection as a coverage threshold—signals a broader shift toward more consumer-friendly standards in wildfire insurance claims
In addition, the recent decision in the case, Jay Cliff v. California FAIR Plan Association (Case No. 21STCV20095), involved a homeowner whose property was contaminated by smoke and ash from the 2020 Mount View Fire. FAIR Plan denied the claim, relying on internal guidelines that limited coverage to only damage that was visually or olfactorily perceptible without assistance.
Judge Rice rejected this interpretation, holding that smoke damage must be treated no less favorably than any other form of direct physical loss under California insurance law. The court emphasized that the presence of smoke contamination—whether visible or not—can constitute physical loss if it impairs the habitability or function of a property, and that requiring unaided sensory detection imposes an unlawful and arbitrary restriction on coverage.
If you should have any questions or are in need of further information, please call McGonigle Law for a free confidential consultation. Call (800) 713-5260 today!
