Kathleen Jordan, her husband and young daughter, consider themselves fortunate. They not only managed to flee to safety from the Eaton fire, but the family’s Altadena home somehow escaped the flames, even though their chicken coop and detached storage units burned, like many homes on their street.
But three months after the fire, Jordan says the family isn’t close to moving back. And she blames one entity for that: the California Fair Plan, the state’s insurer of last resort.
Jordan says a door at their East Loma Alta Drive home swung open during the firestorm and the interior was coated with debris. Yet, she says, the Fair Plan has failed to properly investigate or pay for any remediation of the soot, ash and smoke damage.
“We sort of celebrated thinking that we we were in this really lucky group of people, only to find out later that that is not at all the case,” said Jordan, 36, who is diabetic and pregnant. “It’s a full-time job, chasing them down, emailing, calling, trying to get communication from them — and their lack of paying what we’re owed. It’s incredibly frustrating and just maddening.”
Jordan and her husband, Stephen Unckles, are among 10 victims of the Eaton and Palisades fires who are plaintiffs in a Los Angeles County Superior Court lawsuit filed Thursday against the Fair Plan.
It’s the first mass tort case against the plan that has arisen out of the Jan. 7 fires, though the insurer has faced litigation in Los Angeles and elsewhere in California over smoke damage claims.
The lawsuit accuses the Los Angeles-based plan of insurance bad faith and breach of contract through its refusal to properly investigate and pay for the cleanups as required by state law, even though “wildfire smoke had transformed their homes into toxic traps, with each room and surface caked with invisible, hazardous chemical residue.”
Also named as defendants are 10 large California home insurers, which operate the Fair Plan along with other licensed state home insurers as a means or providing insurance to property owners who can’t get coverage from regular carriers.
“We have already heard from hundreds of people who are facing denials and underpayments from the Fair Plan for the massive contamination in their home caused by these wildfires,” said attorney J. Eli Wade-Scott, global managing partner at Edelson in Chicago, which is representing the families.
Among the the named defendants are Mercury, Farmers, AAA and State Farm, the state’s largest home insurer, which has been accused of being stingy itself about how it handles Jan. 7 smoke damage claims.
A spokesperson for the Automobile Club of Southern California declined to comment. The Fair Plan and the other insurers did not respond to requests for comment.
Rex Frazier, president of the Personal Insurance Federation of California, which represents major property and casualty insurers, said the lawsuit represents a “bona fide dispute” over Fair Plan policy language regarding smoke damage.
“However, we are unaware of any [California Department of Insurance] regulations outlining the standards for smoke claims,” he wrote in an email. “There are different views on what is a compensable smoke claim and there are no state standards. We are unaware of any external scientific consensus on this.”
The fires have already spawned numerous lawsuits, including against Southern California Edison, which has acknowledged that its power lines in Eaton Canyon may have started the conflagration that destroyed more than 9,000 homes and killed 18 people. The Los Angeles Department of Water and Power also has been sued for its alleged role in causing the Palisades fire.
The Fair Plan has grown dramatically over the last several years as other insurers have pulled out of fire-prone areas across the state.
In February, the plan received approval from Insurance Commissioner Ricardo Lara to assess its member companies $1 billion to help pay its Jan. 7 fire claims — with consumers possibly on the hook for nearly half of that under a new department policy. The plan estimates losses of roughly $4 billion from the fires.
The Fair Plan was sued in Los Angeles County Superior Court on April 2 by an Altadena woman with similar complaints about her smoke-damaged home, who alleges she was advised by the insurer to just “pick up a broom and sweep.”
The latest lawsuit alleges that as the Fair Plan’s policyholder base increased over the past decade, it sought in 2016 to limit its financial exposure to claims by executing a “deliberate scheme” to insert illegal coverage restrictions in its policies.
Specifically, it redefined “direct physical loss” as requiring “actual loss or physical damage, as evidenced by permanent physical changes” to a property — and then allegedly assured the insurance department that the definition would result in no change in coverage or possibly even more. After the new approved policies were issued in 2017, the lawsuit alleges the Fair Plan “began systematically denying wildfire smoke damage claims,” citing the new policy language.
After a series of devastating fires, including the 2018 Camp fire that destroyed the town of Paradise in Northern California, the insurance department in January 2021 notified the Fair Plan that this practice was illegal, but the insurer “ignored” the directives, the lawsuit asserts, prompting regulators to conduct a “market conduct” exam of the Fair Plan, according to the lawsuit.
That exam, cited in the lawsuit and reviewed by The Times, found 418 violations of the California Insurance Code and the California Code of Regulations from January 2017 through March 18, 2021. It said the Fair Plan issued a fire policy that did not meet state standards and failed to “conduct and diligently pursue a thorough, fair and objective investigation.”
Similar allegations have spurred several lawsuits across California, including cases filed in Los Angeles in 2021, in Alameda County last year and in Butte County last month.
The 2021 case was a proposed class action led by a resident of Mono County whose home was damaged by soot, smoke and debris in the 2020 Mountain View fire. He alleged the Fair Plan failed to properly restore his home.
“If the Department of Insurance had done in 2022 what we hoped it would do, which is to fix this problem, we don’t believe these lawsuits would be necessary,” said attorney Dylan Schaffer, who brought all three cases and is working with Edelson.
Lara issued a bulletin last month reminding insurers — and specifically naming the Fair Plan — that they must “handle smoke damage claims in compliance with all applicable laws, regulations, and best practices for remediation of smoke damage.”
Schaffer said the bulletin was only advisory.
Michael Soller, a spokesman for Lara, declined to comment on the lawsuit but said the commissioner expects the Fair Plan “to process and pay all claims, including all smoke claims, in line with industry standards and in compliance with all laws.”
The post Ten victims of the Jan. 7 fires sue the California Fair Plan over smoke damages appeared first on Los Angeles Times.
