Wildfire Smoke and

A wildfire burns miles away. The flames never reach the property. But the smoke does. It penetrates the building envelope, saturates soft furnishings, embeds in HVAC ductwork, deposits carcinogenic particulate matter on every surface, and leaves behind volatile organic compounds that linger for months. The home is not charred. It is not structurally compromised by flame. But it is contaminated — and depending on the severity of the infiltration, it may be uninhabitable until professional remediation is completed.

The policyholder files a claim. The insurer responds with a now-familiar argument: smoke odor and particulate contamination do not constitute “direct physical loss of or damage to” property. The home still stands. The structure is intact. Therefore, the insurer argues, there is no covered loss.

This argument has become one of the most consequential coverage disputes in California property insurance. It sits at the intersection of environmental science, policy interpretation, and a body of case law that developed rapidly during the COVID-19 pandemic and is now being applied — with very different results — to wildfire smoke contamination.

The “Direct Physical Loss” Requirement

Nearly every property insurance policy conditions coverage on “direct physical loss of or damage to” the insured property. This phrase does two things: it limits coverage to physical (as opposed to purely economic) harm, and it requires a direct connection between the peril and the loss. What the phrase does notdo — despite what many insurers argue — is require structural destruction. The word “loss” is separate from “damage,” and California courts have recognized that distinction.

The phrase “direct physical loss of” property refers to situations where the property is rendered unusable or inaccessible — a loss of the property’s functionality — even without visible structural damage. The phrase “damageto” property refers to a tangible alteration of the property’s physical condition. Wildfire smoke contamination can satisfy both prongs, depending on the circumstances.

The COVID Split: What the Courts Actually Said

The COVID-19 pandemic generated hundreds of insurance coverage decisions across the country, and many of them addressed the meaning of “direct physical loss.” Businesses that were forced to close due to government orders filed claims under their property policies, arguing that the loss of use of their premises constituted direct physical loss. The overwhelming majority of courts rejected these claims. But the reasoning matters as much as the outcome — because the reasoning actually supports wildfire smoke policyholders.

The California Supreme Court: Another Planet Entertainment

The most significant California decision came in Another Planet Entertainment, LLC v. Vigilant Insurance Co.(2024) 15 Cal.5th 1106 (parallel cite 548 P.3d 303). The California Supreme Court held that “direct physical loss of” property requires a “distinct, demonstrable, physical alteration of property.” The court rejected the pure “loss of use” theory — meaning that the mere inability to use property due to a government order, without any physical change to the property itself, does not trigger coverage.

Two features of the opinion matter for wildfire smoke claims. First, the court was careful to define what it meant. The “physical alteration” requirement is not the same as requiring structural damage. The court acknowledged that contamination can constitute a physical alteration, and the opinion specifically distinguished situations involving actual physical substances — toxic gases, hazardous particles, and environmental contaminants — from the mere theoretical presence of a virus. Second, the court was explicit that its holding was narrow: “[W]e cannot and do not decide whether the COVID-19 virus can ever constitute direct physical loss or damage to property.” The opinion is therefore a holding that these particular allegations failed to plead physical alteration, not a categorical rule that contamination cannot satisfy the standard. Policyholder-side coverage commentary has consistently emphasized this distinction, noting that Another Planetpreserved the contamination-based theory of physical loss while rejecting the government-order-only theory. Opposing counsel will sometimes invoke the court’s reservation against COVID virus claims as if it sweeps more broadly; it does not.

Gharibian v. Wawanesa: What It Does and Does Not Hold

Insurers have seized on Gharibian v. Wawanesa General Insurance Co. (2025) 108 Cal.App.5th 730 as authority for blanket smoke damage denials. In Gharibian, the California Court of Appeal (Second District, Division 2) ruled against the policyholder — but on very specific factual grounds. The Granada Hills home suffered soot, ash, and fire debris contamination from the 2019 Saddle Ridge Fire. Critically, the plaintiffs’ own industrial hygienist (L.Y. Environmental) testified that soot by itself does not physically damage a structure and that the home could be fully cleaned by wiping surfaces, HEPA vacuuming, and power-washing the outside. The insurer had paid over $20,000 for professional cleaning services that the plaintiffs never used. Applying Another Planet, the court held that this debris did not alter the property in a lasting and persistent manner and was easily cleaned or removed. The court did not hold that smoke damage can never constitute direct physical loss. It held that this particular claimant failed to demonstrate lasting and persistent physical alteration on the record before the court.

The precedential weight of Gharibianhas itself been contested. The California policyholder bar — through United Policyholders, in partnership with the Consumer Federation of America — petitioned the California Supreme Court for depublication of the opinion (case no. S289700) on the grounds that the Court of Appeal misconstrued long-settled California law that a peril causes “direct physical loss or damage” when it changes the surface of the property and renders the property hazardous or unusable, and that the Court of Appeal improperly analogized wildfire smoke to the COVID-19 virus at issue in Another Planet. The depublication request was effectively denied; the opinion remains published and citable as 108 Cal.App.5th 730. But denial of a depublication request is not an expression of the California Supreme Court’s agreement with the result or the reasoning of the underlying opinion (Cal. Rules of Court 8.1125(d)), and modern depublication denials cannot be read as merits endorsement because the Court denies essentially all such requests as a matter of routine practice. The depublication record is itself useful evidence that the consumer-side bar views Gharibianas wrongly decided, even if the case remains citable. Insurer counsel relying on Gharibian as if it were a settled doctrinal anchor for denying smoke claims is overreading both the opinion and its precedential reception.

The California Department of Insurance recognized the danger of carriers misreading Gharibian and issued Bulletin 2025-7 specifically to address the problem. The CDI made clear that smoke damage can constitute covered direct physical loss, that insurers have a duty to investigate smoke damage claims rather than issue blanket denials, and that reliance on Gharibianas a basis for categorical denial is improper. For detailed analysis of the CDI’s position, see CDI Bulletin 2025-7 and Your Rights.

Why Wildfire Smoke Is Different from COVID

The critical distinction between COVID business interruption claims and wildfire smoke property claims lies in the nature of the physical alteration. COVID claimants struggled to demonstrate physical change to their property because the virus — to the extent it was present on surfaces at all — could be eliminated through routine cleaning and did not leave lasting physical traces. Courts found that this did not rise to the level of a “distinct, demonstrable, physical alteration.”

Wildfire smoke contamination is categorically different:

• Measurable particulate deposits. Wildfire smoke contains PM2.5 and PM10 particles, polycyclic aromatic hydrocarbons (PAHs), volatile organic compounds (VOCs), and heavy metals. These substances physically deposit on and embed within building materials. They can be detected, measured, and quantified through environmental testing.
• Penetration of porous materials. Smoke particles penetrate drywall, insulation, carpeting, upholstered furniture, clothing, and soft goods in ways that cannot be reversed through surface cleaning alone. In severe cases, building materials must be removed and replaced because the contamination has penetrated beyond what cleaning can reach.
• HVAC system contamination. Smoke infiltrates ductwork, filters, and mechanical systems. Even after the exterior air quality improves, contaminated HVAC systems continue to recirculate particulate matter throughout the structure. For detailed information on smoke remediation requirements, see smoke cleanup protocols.
• Documented health hazards. The health effects of wildfire smoke contamination are well-documented. Unlike the speculative surface presence of a virus, the carcinogenic compounds in wildfire smoke create genuine, measurable health risks for occupants of contaminated structures.
• Persistent alteration.Without professional remediation — often including removal and replacement of contaminated materials — the physical contamination remains. It does not dissipate on its own. The property’s physical condition has been altered in a way that requires affirmative restoration.

Federal courts in California have begun to treat the wildfire-smoke distinction expressly. In Bottega, LLC v. National Surety Corp., No. 21-cv-03614-JSC, 2025 U.S. Dist. LEXIS 5666 (N.D. Cal. Jan. 10, 2025), Judge Jacqueline Scott Corley denied an insurer’s motion for summary judgment in a business-income dispute arising from the 2017 North Bay Fires. The defendant insurer had made admissions during discovery — including that the fires caused smoke, soot, and ash damage and direct physical loss and damage to the insured locations — which the court held conclusively established physical loss or damage. Bottega is the strongest federal-court authority in California for the proposition that documented smoke contamination meets the direct-physical-loss requirement under a property policy with COVID-era language. Judge Corley distinguished the COVID line of cases by analogizing smoke to asbestos and other contaminants that physically alter property, rather than to a virus that can be removed through cleaning, and cited Inns-by-the-Sea v. California Mutual Insurance Co. (2021) 71 Cal.App.5th 688 for the proposition that contamination of a structure that seriously impairs or destroys its function may qualify as direct physical loss.

A wildfire-smoke claim built on documented soot deposition, embedded volatile organic compounds, and HVAC contamination is structurally the kind of fact pattern Another Planet preserves coverage for — and Bottegais the case that operationalizes that distinction at the trial-court level. The only issue Judge Corley sent to the jury was causation: whether the policyholder’s closure on October 9, 2017 was caused by the smoke damage or by other factors (lack of customers, staffing shortages, general post-fire disorder). Even with documented physical damage, the policyholder still bears the burden of proving the loss-of-business-income causation chain.

The Pre-COVID Foundation: Contamination as Physical Loss

Long before COVID, California and federal courts applying California law recognized that contamination could constitute direct physical loss. These decisions remain good law and provide important support for wildfire smoke claims:

• Hughes v. Potomac Insurance Co. (1962) 199 Cal.App.2d 511: A foundational California case establishing that “physical loss” includes loss of use and habitability, not just structural destruction. The court held that a home rendered uninhabitable by a landslide had suffered a “direct physical loss” even though the structure itself was relatively intact.
• Western Fire Insurance Co. v. First Presbyterian Church (Colo. 1968) 437 P.2d 52:Although a Colorado decision, this case is widely cited for the principle that gasoline fumes permeating a building constituted physical loss — even though the structure was not visibly damaged — because the contamination rendered the building unusable and required remediation.
• Farmers Insurance Co. of Oregon v. Trutanich (Or. Ct. App. 1993) 858 P.2d 1332: Held that methamphetamine contamination constituted direct physical loss because the chemical residue required remediation before the property could be safely occupied.

The through-line in these decisions is clear: when a substance physically contaminates a property in a way that renders it unfit for its intended use and requires remediation to restore, the property has suffered a direct physical loss. Wildfire smoke contamination fits squarely within this established framework. Attorneys at Shernoff Bidart Echeverria have consistently advocated this position in representing California wildfire claimants, emphasizing that the science of particulate contamination makes smoke damage claims fundamentally stronger than the COVID claims that courts rejected.

California’s Regulatory Position

The California Department of Insurance has taken an unequivocal position on wildfire smoke damage. CDI Bulletin 2025-7 states that smoke damage to residential and commercial properties can constitute covered loss under standard property policies. The bulletin specifically addresses the pattern of insurers issuing blanket denials based on a misreading of Another Planet and Gharibian, and directs carriers to investigate each smoke damage claim individually rather than applying categorical exclusions.

The CDI’s position carries significant weight in California. While CDI bulletins are not binding law in the same way that court decisions are, they represent the regulatory body’s interpretation of the insurance code and establish the standard against which the Department will evaluate carrier conduct. An insurer that issues blanket smoke damage denials in contravention of Bulletin 2025-7 risks regulatory action, and the denial pattern itself may constitute evidence of bad faith claims handling.

What Policyholders Should Do

Policyholders whose homes have been contaminated by wildfire smoke — even if the flames never reached their property — should take the following steps to protect their rights and build their claims:

1. Document the contamination immediately. Photograph visible soot and residue. Record odors. Preserve samples of contaminated materials. Do not begin cleaning until the contamination has been professionally documented. Premature cleaning can destroy the evidence needed to prove the claim.
2. Obtain professional environmental testing. Hire a certified industrial hygienist or environmental consultant to conduct air quality testing, surface sampling, and material analysis. The testing should document the types and concentrations of contaminants, compare them to established health and safety standards, and identify which building materials require remediation or replacement.
3. File the claim promptly.Report the loss to the insurer as soon as the contamination is identified. Under California Insurance Code section 2071, policyholders must provide prompt notice of a loss. Do not wait for environmental test results before filing — file immediately and supplement with test results when available.
4. Demand a proper investigation.If the insurer denies the claim without inspecting the property or without ordering its own environmental testing, that failure to investigate may itself constitute a violation of California’s fair claims settlement practices. Under California Insurance Code section 790.03(h), insurers must conduct reasonable investigations before denying claims.
5. Respond to blanket denials in writing. If the insurer cites Another Planet or Gharibian to deny the claim, respond in writing pointing out that those decisions do not support blanket denials of smoke contamination claims, that CDI Bulletin 2025-7 specifically addresses this issue, and that the policyholder has documentation of actual physical contamination that was not present in the cases the insurer is citing.
6. Preserve all contaminated materials.Do not discard contaminated carpeting, insulation, drywall, or other materials until the insurer has had a reasonable opportunity to inspect and test them. If the insurer fails to inspect within a reasonable time after notice, document that failure and proceed with necessary remediation — but preserve representative samples.
7. Engage a licensed Public Adjuster or attorney. Smoke damage claims require the intersection of environmental science, policy interpretation, and regulatory knowledge. A licensed Public Adjuster can manage the documentation and negotiation process. If the claim is denied or significantly underpaid, an attorney experienced in insurance coverage disputes can evaluate the bad faith implications.

The Smoke Exclusion Question

Some policies contain specific smoke-related exclusions or limitations. The most common is the exclusion for “smog, rust, or other corrosion, or dry rot” found in some HO-3 policy forms. Insurers sometimes argue that this language excludes wildfire smoke damage. This argument fails for several reasons.

First, “smog” is not synonymous with wildfire smoke. Smog is a persistent atmospheric condition caused by industrial and vehicular pollution. Wildfire smoke is an acute contamination event caused by a specific fire. The ejusdem generis canon of construction — which limits general terms to the class of specific terms surrounding them — supports the reading that “smog” refers to ambient air quality conditions, not wildfire events.

Second, fire and the resulting smoke are standard covered perils under homeowner policies. The standard HO-3 policy covers fire as a named peril under Coverage A (dwelling) and as an open-peril risk under the policy’s general structure. Smoke from a hostile fire is a natural and expected consequence of the fire peril. An exclusion for “smog” cannot be read to override the express coverage grant for fire and its consequences.

Third, under the doctrine of contra proferentem, ambiguous policy language is construed against the insurer that drafted it. If there is any ambiguity about whether “smog” encompasses wildfire smoke, that ambiguity must be resolved in the policyholder’s favor.

Loss of Use and Additional Living Expenses

Even in situations where the smoke contamination is being investigated and the coverage determination is pending, policyholders may be entitled to additional living expenses (ALE) if the home is not safe to occupy. ALE is a coverage provided by the policy itself (Coverage D in standard HO-3 forms). California Insurance Code § 2051.5 builds on that by setting minimum ALE durations for losses arising from a state of emergency (24 months, extendable to 36 months under specified circumstances). If environmental testing demonstrates that the indoor air quality exceeds safe exposure levels, or that the contamination presents a health risk to occupants, the policyholder should not remain in the home — and the insurer should be covering the cost of temporary housing during remediation.

Insurers sometimes refuse ALE on the theory that the underlying smoke damage claim has not yet been accepted. But the duty to provide ALE does not depend on final resolution of the coverage dispute. If the home is demonstrably unsafe to occupy due to contamination from a covered peril, the insurer’s obligation to provide reasonable temporary housing accrues immediately. Forcing a policyholder to live in a contaminated home while the coverage dispute plays out is itself a potential fair claims violation.

Building the Evidentiary Record

The lesson of Gharibian is not that smoke damage is uncoverable. The lesson is that evidence matters. The policyholder in that case did not present adequate evidence of actual physical contamination. Policyholders who invest in proper documentation and testing avoid that pitfall entirely. The evidentiary record for a strong wildfire smoke claim should include:

• Certified industrial hygienist report documenting contaminant types, concentrations, and locations within the structure
• Air quality test results from inside the structure, compared to applicable health and safety standards (EPA, Cal/OSHA, ASHRAE)
• Surface wipe samples showing particulate deposits on building materials and contents
• Photographic documentation of visible soot, discoloration, and residue
• HVAC inspection report documenting contamination of ductwork, filters, and mechanical components
• Remediation scope of work from a qualified contractor, identifying which materials can be cleaned and which must be removed and replaced
• Medical documentation if occupants have experienced symptoms consistent with smoke exposure (respiratory issues, headaches, eye irritation)

Sources & Further Reading

• Policyholder-side coverage commentary— National policyholder-side coverage practitioners have extensively analyzed the “direct physical loss” debate following COVID and its implications for contamination-based claims, including wildfire smoke. The general consensus is that Another Planet preserved the contamination-based theory of physical loss while rejecting the government-order-only theory.
• Shernoff Bidart Echeverria LLP— As one of California’s leading policyholder-side insurance firms, Shernoff Bidart Echeverria has represented numerous wildfire claimants and analyzed the intersection of smoke contamination, environmental testing, and the direct physical loss standard under California law.
• California Department of Insurance, Bulletin 2025-7— The CDI’s formal guidance on smoke damage coverage, establishing that smoke damage can constitute covered loss and that insurers must investigate each claim individually.
• Another Planet Entertainment, LLC v. Vigilant Insurance Co. (2024) 15 Cal.5th 1106 — California Supreme Court decision establishing the “distinct, demonstrable, physical alteration” standard for direct physical loss claims.