California Insurance Bulletin 2025-7: Smoke Damage Coverage and Claims Guidance

The California Department of Insurance (CDI) has released Bulletin 2025-7, outlining key guidance on the handling of smoke damage claims for properties located in wildfire-affected areas. This bulletin provides clarity on insurance coverage for smoke damage, expectations for claims processing, and regulatory compliance measures.

As a leading wholesale insurance brokerage, National E&S Insurance Brokers remains committed to providing industry partners with up-to-date regulatory insights to ensure compliance and proper claims handling in accordance with California insurance laws.

Key Highlights of Bulletin 2025-7

1. Smoke Damage May Be a Covered Loss

The CDI affirms that smoke damage can be covered under policies insuring against “direct physical loss or damage to property.” Recent court decisions, including Another Planet Entertainment, LLC v. Vigilant Insurance Company (2024), confirm that smoke damage does not need to be structural or visible to qualify as a physical loss, provided it results in a demonstrable impairment of property.

2. Insurer Responsibilities in Smoke Damage Claims

Insurance carriers are expected to adhere to California’s Fair Claims Settlement Practices Regulations, ensuring that all smoke damage claims are handled fairly, promptly, and in good faith. Specifically, insurers must:

• Conduct thorough investigations before making coverage determinations.
• Avoid blanket denials without assessing the unique facts of each claim.
• Cover the cost of professional testing when necessary, rather than shifting the burden to policyholders.

3. Health and Safety Considerations

Wildfire smoke and debris may contain hazardous contaminants, including asbestos, heavy metals, and toxic chemicals. The CDI emphasizes the need for proper remediation efforts and encourages insurers to provide accessible testing solutions, such as at-home test kits, as an initial step in assessing smoke damage.

4. Regulatory Oversight and Compliance

The CDI will be actively monitoring insurance carriers to ensure compliance with state regulations and fair claims handling practices. Insurers failing to adhere to these guidelines may be subject to regulatory enforcement actions.

National E&S Insurance Brokers: Supporting Compliance and Best Practices

At National E&S Insurance Brokers, we recognize the evolving regulatory landscape and the importance of proper claims management for wildfire-related losses. We remain dedicated to providing our retail agents and industry partners with the resources and guidance needed to navigate these complex claims.

For full details on Bulletin 2025-7, access the complete document here:
Download Bulletin 2025-7

For further regulatory updates, visit the California Department of Insurance at www.insurance.ca.gov.

For inquiries regarding commercial property coverage and wildfire-related risks, contact National E&S Insurance Brokers at (661) 266-4444.