Here’s Soot in Your Eye – Wildfires without Property Damage

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The California Court of Appeal, Second Appellate District, just released an opinion in Gharibian v. Wawanesa General Insurance Co.[1] addressing insurance bad-faith claims arising out of the California wildfires in 2019.  Basically, the Court found the insurance company “did not breach (and could not have breached)” the subject insurance policy because the homeowners did not present a covered claim.

Briefly, the homeowners survived the Saddle Ridge wildfire that swept California in October 2019.  Thankfully, the home itself did not burn or suffer any burn damage.  However, fire debris entered the home and settled on the ground around the home and in the pool.  The homeowners submitted a claim to the insurer.  In November 2019, the insurer’s vendor inspected and estimated cleanup costs of approximately $4,300.  The homeowners did not engage the insurer’s vendor to complete the cleanup.  The homeowners’ cleanup vendor determined that soot settled on the property but did not create any resultant damage.  The homeowners’ cleanup vendor recommended a thorough cleaning, including a HEPA vacuum.  In response, the insurer hired a second vendor who determined the scope of cleaning could be conducted “through normal processes.”  As a result, the insurer paid the homeowners the cleanup costs recommended by the first vendor, less the applicable deductible.  The homeowners did not hire anyone to clean their home, opting to do the work themselves.[2]

The homeowners then retained a second cleanup vendor who estimated the cleaning costs at more than $35,000.  In response, the insurer retained another vendor, and the insurer issued additional checks totaling $16,400.  Later, the insurer paid an additional $2,400 to clean the pool.  Dissatisfied with the adjustment of their claim, the homeowners filed suit in 2020.  After discovery, the insurer moved for summary judgment.

Addressing the insurer’s motion for summary judgment, the trial court held the homeowners had not incurred a covered claim.  The trial court simply concluded there was no evidence of “physical loss” within the meaning of the policy. 

The homeowners appealed, and the appellate court affirmed. The appellate court focused on whether the homeowners had shown “direct physical loss to property.”  In short, the court stated that the damage “must result in some injury to or impairment of the property.”  Finding that the debris was “easily cleaned or removed,” the court concluded “[s]uch debris does not constitute ‘direct physical loss to property.’”

In concluding the home had not suffered direct physical loss, the appellate court cited the recent California Supreme Court case of Another Planet Entertainment, LLC v. Vigilant Insurance Co..[3]  In Another Planet, the California Supreme Court considered whether the presence of the COVID-19 virus on a premises constituted physical damage.  While the Court left for another day whether the presence of the virus could ever constitute direct physical loss or damage, the Supreme Court concluded the insured’s allegations regarding the virus were insufficient.  Similarly, in Gharibian, the appellate court determined that the presence of soot alone, without more, did not constitute direct physical damage to or loss of property within the meaning of the policy.  The court reaffirmed the “[t]he long-standing California view that direct physical loss to property requires a distinct, demonstrable, physical alteration of property.” 

Finally, the court quickly rejected the homeowner’s contention that the insurer’s payments constituted an admission of coverage.  The court held the insurer’s payments to be irrelevant to the question of coverage, because in this case the payments were unrelated to the question of coverage.  In fact, the appellate court noted that insurers’ payments alone may not be construed as an admission of liability or coverage.

The Gharibian decision reaffirms the insurer’s right to determine coverage and enforce the terms of the insurance contract.  At the same time, insurers are able to accommodate their insureds’ claims for reasons unrelated to coverage.

_{[1]           ___ Cal. Rptr. 3d ___, No. B325859, 2025 WL 426092 (Cal. Ct. App. Feb. 7, 2025).}

_{[2]           The appellate court noted that the insurer paid the homeowners more than $20,000 for cleaning services the homeowners never used.}

_{[3]           548 P.3d 303 (Cal. 2024).}