Will California’s New Smoke Claims Law Create a Recovery Bottleneck?

Where there’s smoke there’s fire, but is the reverse true? The presumption in California could be that it is.

One fallout from the plague of wildfires that struck California in recent years is that smoke claims became a bigger issue and more often a point of contention between insurers and policyholders.

The conflict over smoke damage after wildfires led to a task force to look at smoke damage claims and a new law in California designed to address the hazy area between the fire and claims on homes that are less visibly affected that involves testing and remediation, but some worry about a potential “bottleneck” in the recovery process.

California Gov. Gavin Newsom recently signed legislation establishing standards for investigating, testing and restoring smoke-damaged homes. Assembly Bill 1795, the Smoke Damage Recovery Act, creates a rebuttable presumption — a legal assumption a court accepts as true unless an opposing party is able to disprove it — that smoke damage was caused by a wildfire when wildfire smoke, ash, soot, char or combustion byproducts are present in a surviving residential property within a wildfire impact zone.

“The presumption in AB 1795 is principally a causation presumption, not a presumption that every surviving home in the wildfire impact zone sustained smoke damage,” explained Brandon Sipple, an attorney with the law firm Kennedys. “The statute applies where wildfire smoke, ash, soot, char, or combustion byproducts are present in a surviving residential property within the wildfire impact zone. When those conditions are met, the statute creates a rebuttable presumption that the resulting smoke damage was caused by that wildfire.”

Other mandates of the Smoke Damage Recovery Act include:

• Establishing timelines for inspections and claim handling.
• Requiring repair estimates that restore homes to their pre-loss condition while
• meeting health and safety standards.
• Preserving policyholders’ rights to choose restoration contractors.
• Establishing training requirements for adjusters handling smoke damage claims.
• Protecting workers performing restoration and remediation activities.

AB 1795 directs the California Department of Insurance and the California Office of Emergency Services to evaluate challenges posed by smoke damage and develop recommendations to strengthen protections for property insurance consumers and communities affected by future contamination events.

Related: Viewpoint: Smoke Damage from LA Wildfires Leaves Questions to Be Answered

The legislation grew out of efforts led by the CDI, wildfire survivors, consumer advocates, public health experts, and legislators, to address what they call a consumer protection gap. The gap and a lack of clarity over smoke damage claims had CDI and carriers quarreling, and more recently the California FAIR Plan ran afoul of the department over the handling of smoke damage claims.

Following the L.A. fires, Lara created the Smoke Claims and Remediation Task Force, which reported that more wildfire victims were falling through the gaps in smoke damage inspection, testing and restoration rules.

Smoke Damage Claims

Smoke damage from wildfires is a frequent occurrence. According to the CDI, there were more than 13,000 smoke damage claims after the January 2025 L.A. wildfires.

Data from Delos Insurance Solutions, a San Francisco-based home insurance non-admitted MGA serving California homeowners, shows smoke-only damage has represented 25% to 30% of its wildfire-related claims.

Bryan Corder, head of claims for Delos, said that claims experience has taught them that a wildfire’s impact “doesn’t end when the flames are extinguished.”

“The related smoke can cause damage that isn’t always visible, making a thoughtful and thorough property evaluation important,” Corder said.

The new law does not “dispense with the predicate factual question of whether the relevant substances or smoke damage are present at the particular property,” said Sipple. According to him, that is an important distinction.

A property’s location within an impact zone puts it within the statute’s geographic framework, but the location alone doesn’t establish that the property sustained smoke damage, he added.

The law does not require professional testing of every property in a wildfire impact zone. Section 2060.2 of the law applies to covered smoke-damage claims within the wildfire impact zone and it makes an insurer responsible for the cost of sampling and testing that is “necessary” to restore the damaged property to its pre-loss condition and clear it for human occupancy.

Once sampling or testing is necessary, carriers must follow the regulations or guidance developed under the statutory framework, according to Sipple.

However, if a property doesn’t have any visible damage, that doesn’t mean testing is unnecessary.

“The lack of visible soot, residue, or discoloration should not, standing alone, end an insurer’s investigation,” Sipple said.

As most claims professionals know, smoke contamination isn’t always apparent in visual inspections. Considerations for smoke damage possibilities may include a property’s location, reported fire and smoke conditions and HVAC exposure, Sipple said.

“At the same time, impact-zone status alone does not appear to compel identical professional testing at every residence,” he added.

Sipple pointed to Section 2060.2(d) of the act, which addresses the timing of an insurer’s inspection if the insurer exercises its right to inspect.

“Section 2060.2(b) separately requires the insurer to cover sampling and testing that is necessary for restoration and clearance,” he said. “The practical distinction is that a reported smoke-damage claim must be appropriately investigated. That investigation should inform whether professional sampling or testing is necessary. If it is necessary, the insurer is responsible for the cost, and the testing must comply with the applicable standards.”

Bottlenecks

Based on 20-plus years of handling fire claims, Tom Brocksmith, vice president of catastrophe operations at Crawford & Company, has seen smoke damage claims most often outnumber structural damage claims following wildfires.

That is at the heart of his concern over the new law. Because smoke claims volume is typically high after wildfires, which themselves require a rapid response from large number of resources, Brocksmith worries the new law will add to the already considerable workload of testing and remediation, straining the resources needed to handle a claims onslaught.

“So, we can just think of the bottlenecks that that may cause,” Brocksmith said, adding that the complexity of the new law could also add time for claims handlers who must reconcile the changes the law makes with the wording in individual policies. “On top of that, there’s some speculation on how that’s going to be covered in the policy as well.”

Sipple expanded on Brocksmith’s bottleneck concerns.

“Industrial hygienists will certainly be a bottleneck issue, but there are others as well,” Sipple said.

Finding adjusters and public adjusters with the required smoke-damage training and certification poses another potential bottleneck, he said. Sipple emailed a list of other potential bottlenecks:

• Finding remediation contractors with suitable experience, equipment, and worker-protection procedures;
• Laboratory capacity and turnaround times;
• Professionals qualified to interpret test results and assess whether a property has been cleared for occupancy;
• Access delays caused by government restrictions or unsafe site conditions; and
• Coordination among multiple stakeholders, including adjusters, hygienists, laboratories, contractors, building professionals, and public-health authorities.

The American Property Casualty Insurance Association was reached out to for feedback and comment on this article.

Assisted Living Expenses

“Disputes over the appropriate testing scope, sampling locations, remediation plan, treatment of contents, and clearance criteria could create additional delays,” Sipple said. “The coverage of associated costs will continue to require consideration of both the statute and the applicable policy terms, including limits, deductibles, and provisions addressing the dwelling, contents, testing, remediation and ALE.”

Additional living expenses is another potential grey area. The new law addresses when insurers can terminate ALE benefits, but it does not automatically provide ALE to every homeowner within a wildfire impact zone.

According to Sipple, the ALE provision applies to a qualifying covered smoke-damage claim where ALE coverage is available. The law prohibits insurers from terminating ALE coverage for a covered smoke damage claim involving a property within the wildfire impact zone until that property has been restored to pre-loss condition and cleared for human occupancy.

“The provision also remains subject to the applicable policy limit,” Sipple said. “Accordingly, it regulates when ALE coverage may end but does not necessarily provide ALE automatically to every homeowner in the impact zone.”

That creates a separate question about when ALE coverage begins. There is typically a two-week limit in policies that applies during mandatory evacuations. Many policies contain prohibited use coverage that may apply if a home is rendered uninhabitable because of a covered loss, and they often have a dollar or time limit.

“The statute’s rule governing when ALE may be terminated does not necessarily resolve the threshold question of when ALE is triggered under the policy,” Sipple said. “Civil-authority or mandatory-evacuation coverage may have a separate trigger and a relatively short duration. ALE coverage based on conditions at the insured residence commonly depends on policy language requiring a covered loss that makes the home unfit to live in or causes the insured to incur increased living expenses.”

According to him, because Section 2060.1(b) of the law refers to a “covered smoke damage claim,” the statute appears to protect the continuation of qualifying ALE coverage once the relevant statutory and policy predicates have been satisfied.

“It does not rewrite every policy’s ALE insuring agreement,” he added.

That point is behind another concern being raised by Brocksmith: whether ALE will be available while possible contamination is being investigated but before a covered smoke-damage loss has been established.

“So, one of the questions is, ‘Is there going to be coverage?'” Brocksmith said. That question arises when ALE verbiage in a policy states there must be an insured loss that has made a property uninhabitable before ALE kicks in, he added.

Sipple agreed there may be an interim period during which residents cannot confidently return because possible contamination is still being investigated but the insurer has not yet determined that a covered smoke-damage loss exists or that the policy’s ALE trigger has been satisfied.

The law does not clearly convert that period of uncertainty into automatic ALE coverage. A reference in Section 2060.1(b) of the law to a “covered smoke damage claim” suggests that the non-termination protection applies once coverage and entitlement to ALE is established, according to Sipple.

“The Legislature appears to have recognized the broader issue. AB 1795 separately directs the Department of Insurance to study gaps in ALE and business-interruption coverage where there is no mandatory evacuation order and to consider possible alternative triggers, including air-quality thresholds and public-health advisories,” Sipple said. “That study provision indicates that the present legislation does not itself resolve every potential coverage gap. The immediate issue in such a case would therefore remain policy- and fact-specific, including what was known about the property’s condition, whether there was a covered physical loss or damage, whether the home was rendered uninhabitable, and whether any civil-authority, prohibited-use, or other potentially applicable coverage was triggered.”

Despite the gray areas, as peak wildfire season in risky states like California nears, Brocksmith is preparing his teams and their partners to be ready to handle additional requirements created by the new law, including beefing up the number of certified hygienists already on contract.

“We’re ready to go and we will be,” he said. “Our job is to ID these wildfires, storms etc., as they’re happening and position ourselves. So, we’ve got plenty of environmental hygienists for testing on that roster and ready to go. They are ready to test in accordance with what this new regulation is. Have they the required new training or knowledge to do that? That’s the $64,000 question.”

Top photo: 2025 Pacific Palisaides Fire. Photo by CAlFire.