A recent court decision says the FAIR Plan’s smoke-damage policy was illegal: what it means for your past or future claim
On June 25, 2025, a Los Angeles judge issued a decision that could change the way smoke-damage insurance claims are handled across California, especially for the more than half a million homeowners insured through the state’s last-resort provider, the California FAIR Plan.
The case centered on a dispute between former homeowner Jay Aliff and the FAIR Plan over coverage for smoke damage caused by the 2020 Mountain View fire.
The court found that the FAIR Plan’s long-standing policy on smoke damage was illegal under state law.
Here’s what you need to know.
Is smoke damage supposed to be covered by fire insurance?
Yes. California law requires insurers to follow the Standard Form Fire Insurance Policy, which covers all losses by fire, including smoke damage. That includes smoke that may not leave visible damage but can be detected by lab tests, as well as smoke that causes contamination inside a home.
What did the FAIR Plan do wrong?
The FAIR Plan changed its policy language in recent years to deny many smoke-damage claims. Specifically, it:
- Required “permanent physical change” to the property, not just residue or odor
- Rejected lab-tested evidence unless the smoke damage could be seen or smelled by an average person
- Told policyholders to try cleaning the damage themselves before pursuing a claim
The court ruled these restrictions were illegal because they conflict with the minimum standards required by California law.
What does this ruling mean for homeowners now?
- New claims: FAIR Plan will have to update its smoke-damage policy and claims practices to meet state requirements.
- Past claims: The decision could open the door for previously denied or underpaid smoke-damage claims to be reviewed or reopened, possibly as far back as 2017.
- Higher scrutiny: FAIR Plan must now conduct fair and thorough investigations, including using lab testing when appropriate.
Does this only apply to FAIR Plan policyholders?
This case specifically involves the FAIR Plan, but it may influence how other insurers handle smoke-damage claims, too. The ruling reinforces that insurers in California cannot restrict fire-related coverage below what state law requires, no matter how they define “direct physical loss” in their policies.
Will this make home insurance more expensive?
Industry groups have warned that broader claim requirements and more testing could increase costs, which may lead to higher premiums for FAIR Plan policyholders. However, consumer advocates argue that insurers shouldn’t cut corners on coverage just to keep prices low, especially not in a high-risk state like California.
Can I take action if I’ve had smoke damage?
Possibly, especially if your damage occurred in or after 2017. That’s when the FAIR Plan changed its policy language to require “permanent physical change” and visible damage, which the court has now ruled was illegal under California insurance law.
If your smoke-damage claim was denied, underpaid, or you never filed one because you thought it wouldn’t qualify, this decision could give you grounds to pursue it.
While the judge didn’t certify a class action, legal experts say the ruling could reopen claims dating back to 2017. That includes the possibility of revisiting closed claims and challenging denials that relied on now-invalid policy language.
How do I know if my home has smoke damage that qualifies for coverage?
If your home was exposed to wildfire smoke, especially if windows were open, your HVAC system was running, or smoke infiltrated through vents or broken seals, there’s a strong chance you experienced damage. Common signs include soot deposits, staining on walls or ceilings, lingering odor, or damage to soft materials like furniture, carpets, and drapes. In many cases, lab testing can detect harmful particulates not visible to the eye. Under the court ruling, even damage confirmed by scientific testing (whether or not it’s visible) is covered under California’s required fire policy standards.
What if my home smells like smoke but looks fine? Does that count?
Yes, it can. The FAIR Plan previously rejected claims based on smell or lab tests, requiring visible damage. But the court found that approach to be illegal. If your home smells like smoke (even without visible staining or residue), you may still have a valid claim, especially if testing reveals contamination. Smoke can permeate porous materials and affect indoor air quality long after a fire has passed.
Is it worth hiring a public adjuster for a smoke-damage claim?
Often, yes. A licensed public adjuster works for you (not the insurance company) and can help you document the full extent of the damage, arrange for appropriate testing, and negotiate for a fair settlement. This is especially useful if you’re unsure what your policy covers or feel you were previously lowballed or denied unfairly. Given the complexity of smoke claims and the legal ruling against restrictive policies, a public adjuster can be a valuable advocate.
What if I already accepted a settlement? Can I still take action?
That depends on your specific case. If you signed a release waiving future claims, it may limit your options. But in some cases, especially if the insurer relied on now-illegal policy language, you may be able to challenge the settlement or seek a supplemental claim. An attorney familiar with California insurance law can help you determine whether your situation qualifies for further action.
How do I prove the damage if I have already made repairs?
You can still pursue a claim, but documentation is key. Look for any photos, videos, receipts, contractor invoices, or inspection reports from the time of the damage. If you worked with a cleaning company or restoration service, ask if they retained records. Even written accounts, timelines, or communications with your insurer may help build your case. A public adjuster or attorney can help you gather and present the evidence needed.
What do I do if I have smoke damage or think my claim was unfairly denied?
If you’re a California homeowner and believe you’ve been affected by the FAIR Plan’s past or current handling of smoke-damage claims, here are steps you can take:
Gather documentation
- Collect any evidence of smoke damage to your property, including:
- Photos of soot, ash, or discoloration
- Reports from industrial hygienists or lab testing (if available)
- Repair estimates or invoices
- Past communications with your insurance provider
Even if you’ve already been denied or received a low payout, this documentation can be useful for reopening your claim.
Review your policy and claim history
Look at your FAIR Plan policy and any past claims related to fire or smoke. Pay attention to how the claim was handled, especially if it was denied due to lack of visible damage or other now-invalid policy language.
Consider filing a new or supplemental claim
Depending on when your original claim was filed and how it was handled, you may be able to:
- Reopen a denied or underpaid claim
- File a supplemental claim if new damage has been discovered
- Request a formal re-evaluation under updated standards
Talk to a public adjuster
A public adjuster represents you, not the insurance company, and can help document damage, request lab testing, and negotiate a fair settlement. This can be especially helpful if your original claim was denied or underpaid based on now-outdated standards. A good adjuster knows how to navigate these kinds of disputes and can often recover more than homeowners might on their own.
Explore legal options
If your claim was wrongfully denied or you suffered financial harm due to FAIR Plan policies now deemed illegal, legal action may be possible. Consulting an attorney familiar with wildfire insurance issues can help clarify your options.
Contact the California Department of Insurance
You can file a complaint with the California Department of Insurance if you believe your insurer violated the law or failed to investigate your claim properly. They’ve already investigated FAIR Plan’s practices and may take further enforcement action.
Bottom line?
If your home was damaged by smoke, even if the damage wasn’t immediately visible, you may be entitled to compensation. And thanks to this ruling, you have a stronger legal foundation to challenge denials and demand proper treatment under the law.
