Judge Rules California’s FAIR Plan Smoke Coverage is Illegal in Landmark Decision

A Los Angeles Superior Court Judge recently determined the FAIR Plan’s smoke damage coverage was illegal because it provides less coverage than what is required under the state’s insurance code.

California’s FAIR Plan is the insurer of last resort, covering thousands of homeowners across the Golden State.

Judge Stuart Rice published his decision on Tuesday, claiming the FAIR Plan Assn’s policy violates the state’s insurance code because it provides less coverage than what is required under California’s Standard Form Fire Insurance Policy.

The news comes as a growing number of homeowners continue to battle with the FAIR Plan over its handling of the 2025 Los Angeles wildfires. Some accuse the FAIR Plan of unfairly denying smoke damage claims or failing to pay for adequate repairs.

FAIR Plan’s Smoke Coverage “Violates the Insurance Code” with Less-than-Standard Coverage

As reported by the Los Angeles Times, Los Angeles County Superior Court Judge Stuart Rice determined the FAIR Plan Assn’s policy violated the state’s insurance code by providing less-than-standard coverage:

• Per California insurance code, insurance policies must provide a certain minimum level of coverage set by the Standard Form Fire Insurance Policy.
• This code specifically requires insurers to cover all “loss by fire” damages without distinguishing between fire and smoke damage. In other words, any damage caused by fire – whether smoke damage or direct flame damage – should be covered by the insurance policy.
• The FAIR Plan’s fire coverage, meanwhile, has language that seems to indicate otherwise – and, according to Judge Rice, is in violation of the code. Since 2017, the FAIR Plan has stated that fire claims must result in “direct physical loss” defined as “permanent physical changes” to the property. Homeowners have criticized this language for making it difficult to claim smoke damage.

California’s FAIR Plan is the insurer of last resort for thousands of homeowners across California.

Homeowners unable to obtain insurance through the marketplace can buy coverage through the FAIR Plan.

After State Farm and other insurers cancelled tens of thousands of Los Angeles policies, some homeowners turned to the FAIR Plan.

According to Claims Journal, FAIR Plan policies grew by 85% last year in one specific Pacific Palisades ZIP code – the same ZIP code where State Farm cut roughly 70% of its policies. Many of these homeowners later lost their homes in the 2025 fires.

Prior to 2017, the FAIR Plan did have better coverage for smoke damage. In fact, the organization issued a statement warning policyholders of the new definition, claiming the change “will result in the denial of claims that might have been paid under prior policy wording.”

Insurers Warn Smoke Coverage Could Lead to “Untenable Increases” in Premiums

The FAIR Plan is not a governmental organization; it’s a private organization controlled by insurers.

As the Los Angeles Times reports, the FAIR Plan hasn’t officially responded to Judge Rice’s recent ruling. However, a spokesperson for the Personal Insurance Federation of California, which represents some of the state’s largest insurers, criticized the ruling for potentially increasing costs.

Here’s how Rex Frazier, president of the Personal Insurance Federation of California, explained the situation in a statement to the Los Angeles Times:

If the case stands for the proposition that the FAIR Plan needs to pay for very expensive lab testing in order to deny a smoke claim, then we will all suffer. That would dramatically increase claims expenses, which would, without doubt, lead to rate increase needs for the FAIR Plan.

Homeowners Are Increasingly Angry About FAIR Plan Smoke Damage Claims

Judge Rice’s recent ruling is important because California homeowners continue to struggle with the after-effects of the 2025 fires, particularly FAIR Plan policyholders struggling with smoke damage claims.

Claims Journal recently interviewed one survivor of the 2025 fires, Keri Homolka, who is fighting for a payout after devastating smoke damage.

Homolka and her husband spent $100,000 on testing, cleanup, hotel stays, and repairs after discovering elevated lead levels in the dust around their damaged home. California’s FAIR Plan, however, has offered just $15,000 in compensation.

Last year, State Farm cancelled Homolka’s policy, sending her to California’s FAIR Plan. Homolka’s homeowners insurance policy was one of nearly 70% of State Farm policies cut in one specific ZIP code of Pacific Palisades.

Will the FAIR Plan Change Its Smoke Coverage?

Judge Rice’s June 2025 ruling could force the FAIR Plan to change its coverage requirements – but don’t hold your breath.

Last year, California’s Department of Insurance sent a letter to FAIR demanding that it change its policy and investigate smoke damage claims fairly. The Department of Insurance reviewed FAIR’s smoke damage coverage and found it “void and unenforceable” for failing to offer the minimum level of coverage under California law.

Instead of changing its policy language, however, the FAIR Plan claimed its policy was in line with the policies offered by other insurers. As of today, the FAIR Plan continues to require direct physical loss – including permanent damage – to apply coverage.

Stay tuned to see if Los Angeles Superior Court Judge Stuart Rice’s ruling from this past week will force the FAIR Plan to change the way it covers smoke and fire damage.