(Article from Insurance Law Alert, February 2025)
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Holding
A California appellate court dismissed homeowners’ complaint against a property insurer, finding that the presence of ash and debris on insured property, stemming from a nearby wildfire, did not constitute direct physical loss under the policy. Gharibian v. Wawanesa General Ins. Co., 2025 Cal. App. LEXIS 64 (Cal. Ct. App. Feb. 7, 2025).
Background
The homeowners alleged that, as a direct result of a wildfire near their home, soot and ash managed to enter their home even though their doors and windows were closed, and that ash also fell into their swimming pool. The homeowners alleged that, due to the wildfires, their property sustained over $81,000 in damages to real and personal property. Wawanesa, the homeowners’ property insurer, agreed to pay approximately $21,000 for professional home cleaning services and an additional $2,400 relating to the pool, but refused to pay the entirety of the claim.
A trial court granted Wawanesa’s summary judgment motion and the appellate court affirmed.
Decision
The appellate court ruled that the policy never provided coverage in the first place because there was no evidence of a physical loss. Under California law, direct physical loss requires “a distinct, demonstrable, physical alteration to property.” The court explained that there was no triable issue of fact because experts hired by both parties found no physical damage to the property, and the company hired by the homeowners admitted that soot and debris do not cause physical damage to surfaces.
Additionally, while one deponent stated that ash could create physical damage, he indicated that such damage would only occur if the ash became wet, which did not happen here.
Finally, the court deemed it irrelevant that Wawanesa made multiple claim payments to the homeowners despite contesting coverage. The court held that such payments do not create coverage where coverage does not otherwise exist and are often made “for reasons entirely unrelated to their merits.”
Comments
In rejecting the homeowners’ assertion that the wildfire debris caused physical damage, the court noted that the debris was easily cleaned or removed. Similar reasoning has been applied in numerous decisions denying coverage for COVID-19-related losses, since virus particles are likewise easily eliminated with simple cleaning measures.