Hunton Insurance Recovery Blog

For policyholders, insurance is meant to provide peace of mind—a promise that when disaster strikes, they’ll have financial support to rebuild and recover. But as two recent cases show, the question of what qualifies as covered “direct physical loss or damage” can lead to drastically different outcomes in court.

In two recent California cases, both policyholders sought coverage after wildfire smoke and debris affected their properties. One court ruled in favor of coverage. Bottega, LLC v. National Surety Corporation, No. 21-cv-03614-JSC (N.D. Cal. Jan. 10, 2025). The other sided with the insurer. Gharibian v. Wawanesa General Insurance Co., No. B325859, 2025 WL 426092 (Cal. Ct. App. Feb. 7, 2025). These contrasting decisions highlight issues policyholders may encounter in securing coverage for smoke-related damage and the ongoing debate over what constitutes “direct physical loss or damage,” a key phrase in most property insurance policies.

This post explores these cases, the influence of COVID-19 coverage litigation on the interpretation of “direct physical loss or damage,” and what policyholders can learn to better protect their rights.

The insurance claims process can be daunting even under the most ordinary circumstances; a catastrophic series of fires like Southern California is enduring has created extraordinary circumstances.

To help make the insurance part of the recovery process easier and answer some common policyholder questions, we’ve prepared the following guide for navigating the first steps after a wildfire:

Los Angeles continues to be devastated by wildfires, and our thoughts are with those who have been affected. Tragically, lives have been lost. Homeowners and businesses ordered to evacuate have left behind properties that suffered enormous property damage and loss. At this time, more than 15,000 structures have been burned and counting. Landmarks, places of worship, schools and notable business are among the structures that have been damaged or destroyed. Recent estimates have pegged insured losses in the $20 billion to $30 billion range with some estimates coming in even higher.

Safety is the number one priority. At some point, though, the focus will shift as the fires seize and those affected rebuild and replace their property. There has already been much talk of insurance availability and maximizing insurance recoveries will be a key component of the recovery process. For those who will go through the insurance claims process, we have prepared critical action items to help policyholders navigate the claim process. We also invite you to visit our Wildfire Insurance Resource Center for additional helpful resources and materials, including a seven-part wildfire insurance coverage series that includes an overview on handling the claims process.

As Hawaii deals with the tragic aftermath of recent wildfires that have claimed more than 100 lives and more than 2,000 buildings in Maui, the potential economic fallout is just beginning to take shape. Some experts predict the losses related to the wildfires could result in the biggest disaster-related insurance payout in Hawaii’s history, with property damage alone surpassing $3.2 billion. This post explains the types of losses that usually follow wildfires and the insurance coverages that can respond to such losses. We also offer tips for homeowners and businesses to maximize their insurance recovery in the event of a catastrophic wildfire loss.

Prior posts in this series have discussed insurance coverage issues that pertain directly to wildfire claims, but we have not yet addressed how one proceeds following a loss.  In this post in the Blog’s Wildfire Insurance Coverage Series, we discuss the preparation, submission and negotiation of the insurance claim.

Because of the potential exposure associated with wildfires, many insurers have attempted to withdraw from the property coverage market in various states. In this post in the Blog’s Wildfire Insurance Coverage Series, we discuss the challenges businesses and individuals face in obtaining wildfire insurance coverage, and the regulatory scheme that is intended to help them secure adequate coverage.

Insurance policies provide different levels of insurance coverage and even if the amount purchased was adequate at one time, developments over time (e.g., inflation, upgrades, regulatory changes and surge pricing) may leave the policyholder underinsured. In this post in the Blog’s Wildfire Insurance Coverage Series, we emphasize the need for policyholders to take a close look at the policy’s terms to select the right type and amount of coverage for a potential loss.

Business loss is not limited to fire or smoke damage to its own property – it often arises from damage to the supply chain. In this post in the Blog’s Wildfire Insurance Coverage Series, we look at what coverage may exist when wildfire damages an entity’s supply chain.

Even when claims are within the scope of coverage, insurers often rely on exclusions in an attempt to avoid coverage for wildfire claims. In this post in the Blog’s Wildfire Insurance Coverage Series, we discuss the interplay between coverage grants and exclusions, and the “anti-concurrent cause” provision.

For many policyholders, smoke emanating from wildfire causes as much if not more damage than the fire itself.  In this post in the Blog’s Wildfire Insurance Coverage Series, we discuss damages caused by smoke emanating from wildfires.

Wildfires destroy millions of acres a year in the United States, spewing smoke across much of the nation. The cost of damage alone over the past several years soars into the hundreds of billions. As wildfires continue to spread, particularly as we enter wildfire season, policyholders’ claims will rise and with that, so too will wildfire insurance coverage issues. Many believe that when a fire damages their property and/or interrupts their business operations, a claim gets submitted and is automatically paid; sadly, this is often not the case.

A state-appointed panel advised last week that California should change the standard for determining whether utilities are liable for wildfires.  Under the current system, California’s Public Utilities Code § 2106 provides a private right of action by any person or entity that has suffered loss, damages, or injury caused by prohibited or unlawful acts of a public utility.  Relying on this statute, property owners have asserted wildfire-related claims directly against allegedly culpable electric utility companies.  Public utilities in California also face inverse condemnation claims arising out of wildfires.  Under inverse condemnation, where private property is taken for public use and later damaged by the state or its agency, the state or agency is strictly liable to the property owner.