USA – CALIFORNIA Trends and Developments Contributed by: Cecilia Miller and Ryan Caplan, Buchalter LLP
The year 2025 proved to be another of bellwether opinions from California courts addressing a range of insurance coverage issues, from the scope of property coverage for ash damage to the availability of liability coverage for conduct that is both negligent and inten- tional. Catastrophic events at the beginning of 2025, however, took centre stage in dramatically impacting the California insurance landscape – including imme- diate legislative changes for the insurance industry and forthcoming judicial interpretations of the scope of coverage for property damage. California Insurance Case Law Round-Up for 2025 Three of the most noteworthy California insurance decisions of 2025 are summarised below. Wildfire ash and debris may not be covered in the absence of other direct physical loss under a homeowners insurance policy Gharibian v Wawanesa General Insurance Company (2025) 108 Cal. App. 5th 730, involved a first-party claim under a homeowner policy for clean-up costs associated with debris and ash falling on the insureds’ property from a wildfire that was half a mile away from their home. The court, relying on COVID-19 caselaw, found the alleged damage due to the presence of debris and ash alone, without other fire damage, did not constitute a covered loss under the policy. The policy insured against “direct physical loss to property”. It was undisputed that the plaintiffs’ prop- erty did not suffer any burn damage. Rather, debris from the wildfire entered the home, and there was a lingering smell of smoke that lasted a few months. Following the claim, Wawanesa hired an expert to determine what cleaning was necessary and issued payment to the insured for the estimated cost, minus the deductible. Notably, the insureds opted not to hire professional cleaners and instead cleaned their home themselves. The plaintiffs in turn hired their own experts, one of whom opined that while ash could cause physical damage to certain structures when exposed to water, there was no evidence of such at the home. Anoth- er opined that debris could be cleaned, but that the cleaning costs were substantially greater than the esti-
mate prepared by Wawanesa’s expert. The plaintiffs submitted a new repair estimate. Wawanesa’s expert, in an effort to resolve the matter, revised its estimate to include some but not all of the disputed items, and Wawanesa issued a supplemen- tary payment for its expert’s new estimate amount. Ultimately, the plaintiffs brought suit alleging breach of contract and bad faith. Following discovery, Wawane- sa moved for summary judgment, arguing plaintiffs could not carry their burden of establishing coverage under the policy because there was no evidence of a “physical loss”. Plaintiffs opposed the motion, relying largely on caselaw holding that “particles in the air can cause damage even if they are invisible to the naked eye”. The trial court granted Wawanesa’s motion, and the plaintiffs appealed. On appeal, the Second District affirmed. In so hold- ing, the court construed the policy to require evidence of “direct physical loss to property” to trigger cover- age, and found there was no evidence of the same because the “wildfire debris did not ‘alter the prop- erty itself in a lasting and persistent manner’”. The court relied on the California Supreme Court’s recent decision, Another Planet Entertainment, LLC v Vigilant Insurance Company (2024) 15 Cal. 5th 1106, dealing with property claims arising out of the presence of the COVID-19 virus. Plaintiffs contended Another Planet did not govern, arguing it was limited to claims involving COVID-19, but the court disagreed. The court further disagreed that Wawanesa’s earlier payments created a triable issue of fact regarding the covered nature of plaintiffs’ claim, noting these payments could not be construed as an admission of liability or coverage. Because there was no coverage, the court found there could be no bad faith. Takeaways This case, if applied broadly, could potentially weaken an insured’s ability to recover for damage to a dwell- ing or personal property due to fire debris or smoke, which will no doubt come into play in 2026 as litiga- tion over the Los Angeles wildfires continue. How- ever, it remains to be seen how broadly the case will
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