Property Casualty Focus

The Second Appellate District of the California Court of Appeal recently affirmed a lower court ruling that wildfire debris on an insured’s property did not qualify as “direct physical loss” within the meaning of a homeowners insurance policy, as there was no burn damage to the property. The ruling, Gharibian v. Wawanesa General Insurance Co., is especially noteworthy given its potential impact on insurance claims stemming from the 2025 Los Angeles wildfires.

Background and Underlying Action

The plaintiffs, Hovik Gharibian and Caroline Minasian, had a homeowners insurance policy with Wawanesa General Insurance Co. A wildfire began near their home in October 2019, causing debris to enter the home and surrounding area, including the pool. The plaintiffs’ property did not suffer any burn damage. The plaintiffs submitted a claim to Wawanesa, and over time, Wawanesa ultimately paid the plaintiffs more than $20,000 for professional home cleaning services and $2,400 for pool cleaning services. The plaintiffs chose to clean the property themselves instead of hiring professional cleaners. During this time, the plaintiffs hired a certified industrial hygienist/consultant to inspect the property, who testified that there was no burn or heat damage at the property.

Subsequently, the plaintiffs filed a lawsuit against Wawanesa for breach of contract and breach of the implied covenant of good faith and fair dealing. Following discovery, Wawanesa filed a motion for summary judgment against the plaintiffs, arguing that they did not meet their burden of proving that the wildfire debris fell within the scope of the policy’s coverage. Wawanesa relied on language in the policy requiring that there be “direct physical loss” to the property in order to trigger coverage, and evidence from the plaintiffs’ own consultant, who admitted the wildfire debris did not cause any physical damage. Wawanesa also argued that the fact that they made “generous claim payments” for non-covered debris did not create coverage when it did not otherwise exist.

In opposition, the plaintiffs relied on case law stating that “particles in the air can cause damage even if they are invisible to the naked eye.” The plaintiffs also submitted a declaration from their consultant stating that ash, when combined with water, could cause physical damage. The declaration further stated that the recommended cleaning of their property may compromise the integrity of the property and therefore would require a reevaluation to determine whether additional damages are discovered. Unmoved by the plaintiffs’ opposition, the trial court granted Wawanesa’s motion for summary judgment and the plaintiffs appealed.

Ruling of the Court of Appeals

The court began by noting that insurance contracts are interpreted using ordinary contractual interpretation rules unless a different interpretation is given by the parties, providing a new technical sense or special meaning, and that the burden is on the insured to show that a claim falls within the scope of coverage. The court emphasized that it will not entertain a forced construction of the policy’s insuring clause in order to bring a claim within coverage.

The court concluded that the trial court did not err in granting Wawanesa’s motion for summary judgment, and that to defeat the motion, the plaintiffs had to establish, or at least create a triable issue of fact, that their claim was covered by the policy. In order to do so, the plaintiffs had to show that there was, in fact, “direct physical loss to property.” Under California law, “direct physical loss” requires that there be some “distinct, demonstrable, physical alteration to property,” even if not visible to the naked eye. The court held that all evidence in this case indicated the debris did not “alter the property itself in a lasting and persistent manner,” but rather was easily cleaned or removed from the property. In addition, the fact that Wawanesa made payments to the plaintiffs for amounts that were not actually covered was deemed irrelevant to whether the property sustained “direct physical loss” under California law. The court found that payment for an uncovered claim, in and of itself, cannot be construed as an admission of liability or acceptance of an obligation under the policy that did not otherwise exist. The court therefore affirmed the trial court’s judgment, entitling Wawanesa to its costs on appeal.