A property insurer is not required to pay a claim to a Granada Hills couple whose home was affected by smoke, ash and falling debris from the 2019 Saddle Ridge wildfire, since the contamination did not constitute a “direct physical loss,” a state court has decided.
California’s Second District Court of Appeal on Feb. 7 agreed with a trial court that Wawanesa General Insurance Co. was entitled to summary judgment in a lawsuit brought by Hovik Gharibian and Caroline Minasian. The couple sued their insurer for breach of contract and for failing to act in good faith and through fair dealing, but the appeals court found that their homeowner’s policy did not mandate a payment for remediation because the fire debris did not cause any permanent or lasting issues with the property.
The couple’s insurer had previously provided more than $20,000 for cleaning services that Gharibian and Minasian ultimately did not use. The funds were provided during efforts to resolve the couple’s claims about smoke odors inside their home and ash in the swimming pool, as well as fire debris around their property.
One contractor hired by the plaintiffs estimated that the home was in need of more than $35,000 in general cleaning, interior painting, the painting of exterior wood and stucco, replacement of attic insulation and cleaning of the heating, ventilation and air conditioning (HVAC) system.
The appeals court, however, found that the evidence indicated the debris or ash affecting the property could be easily cleaned and removed and that such debris did not result in “direct physical loss to the property.”
One of the environmental engineers who provided statements about the fire issues said that recommended cleaning of the home would likely compromise the structure’s integrity or cause some damage to building materials, but the appeals court dismissed the statement as speculative.
In addition, the engineer’s previous deposition testimony indicated that painting or HVAC repairs would not be necessary and that power washing would not damage the home’s structure, according to the opinion.
“Finally, the fact that Wawanesa made payments to the plaintiffs even though there was no coverage is irrelevant,” the court said, adding that claims are often adjusted for reasons not related to their merits and that a decision to pay money does not equate to an admission of liability.
Attorney Noah Nash of Lathrop GPM LLP in Kansas City, who co-authored a blog post about the appeals court ruling, stressed that the outcome of such insurance claims vary depending on the specific circumstances.
“While insurers may attempt to construe the holding in Gharibian overbroadly to other fire debris claims, it’s important for policyholders to understand that insurance claims are highly fact-dependent,” Nash told the Southern California Record in an email. “It is well-established under California law that smoke and ash can cause direct physical loss or damage under a homeowners’ insurance policy.”
Policyholders need to be cognizant of the claim process and understand what is and what is not a covered loss, he said.
In his blog, Nash stressed that damage from smoke, ash or soot needs to be well documented and analyzed by qualified experts in order for plaintiffs to meet “the increasingly narrow standard” of a physical loss to a plaintiff’s property. The physical change need not be structural but it must result in some impairment to the property, he said.
The decision may make it harder for homeowners outside the direct burn zone in January’s Palisades and Easton fires to obtain insurance coverage, according to Nash.