A California appeals court ruled that wildfire debris does not automatically qualify as “direct physical loss or damage,” upholding a lower court’s decision to dismiss a breach of contract lawsuit over a partially denied home insurance claim.
In October 2019, wildfires burned about half a mile from the plaintiff’s home, causing debris to enter the property. Some debris fell outside and into the swimming pool, but the house itself did not suffer burn damage. According to the appeals court, smoke odors dissipated in less than three months.
The policyholders hired legal counsel to handle their claim and communicate with Wawanesa General Insurance Co.
A month after the fire, Wawanesa brought in PuroClean to assess the damage and estimate cleaning costs. The firm estimated the cost at $4,308.90.
Instead of hiring PuroClean, the policyholders chose to have a hygienist reexamine the home. The inspection concluded that the property could be fully cleaned by wiping surfaces, using a HEPA vacuum, and power washing the exterior. No burn damage was found.
Wawanesa then hired an industrial hygienist, who confirmed that standard cleaning methods, including wiping surfaces with disposable cloths and using a HEPA vacuum in the attic, would restore the home.
The insurer issued a payment of $2,308.90, reflecting PuroClean’s estimate minus a $2,000 deductible.
The policyholders chose to clean their home themselves rather than hire professionals. By December 2019, they reported finding no visible wildfire debris inside or outside.
Despite this, they hired The Croisdale Group Inc. to estimate cleaning costs. In March 2020, Croisdale estimated more than $35,000 for general cleaning, interior and exterior painting, pool work, HVAC system cleaning, and attic insulation replacement.
After receiving this estimate, Wawanesa brought in a third-party vendor to reassess the claim. The vendor inspected the property alongside the plaintiffs’ counsel and PuroClean, producing a revised estimate of $20,718.09.
- In September 2020, Wawanesa issued a payment of $16,409.19, covering the new estimate minus the deductible and the prior payment.
- In November 2020, the insurer paid an additional $2,400 for pool cleaning, even though previous inspections had not identified a need for it. Wawanesa made this payment to help settle the claim.
- Despite receiving over $20,000 from Wawanesa, the policyholders sued for breach of contract in November 2020.
During discovery, the insurer sought dismissal, arguing that the event was outside the policy’s scope since no physical damage occurred. None of the inspections had identified physical loss. A trial court agreed, dismissing the lawsuit. The plaintiffs then appealed.
The appeals court upheld the lower court’s ruling and stated that Wawanesa’s settlement payments did not create coverage where none existed.
Under state law, “direct physical loss or damage” requires a tangible alteration to property. That alteration does not have to be visible or structural but must impair the property in some way.
The court concluded that all evidence showed no direct physical loss occurred. The debris did not alter the property in a lasting way, as it was easily removed.
