By Carolyn Said, SAN FRANCISCO CHRONICLE

July 15, 2022

https://www.sfchronicle.com/california-wildfires/article/home-smoke-damage-17306521.php 

Where there’s fire, there’s smoke.

But in California, some insurance companies are trying to treat wildfire smoke damage as separate from fire damage so they can illegally limit coverage for it, according to nonprofit advocate Consumer Watchdog and the California Department of Insurance. California insurance companies denied the allegations and said they follow all applicable laws.

With wildfires growing in severity and frequency, insurers are modifying policies “to restrict investigations into the scope of wildfire damage, narrow the benefits they pay under the policy, and create often insurmountable hurdles for homeowners seeking payment for their legitimate claims,” said “Up in Smoke,” a report released this week by Consumer Watchdog, which monitors the insurance industry.

California law requires insurers to cover all losses from fire.

The California Department of Insurance wrote a critical report in late May about limits on smoke-damage claims at the Fair Plan, California’s insurer of last resort for homeowners who cannot find policies in the private market, a growing problem for people in urban-wildland interface areas. The agency said it is actively pursuing this issue with Fair.

In addition, it said it has found and addressed multiple instances where other insurers inserted illegal provisions to limit smoke claims. However, it disputed Consumer Watchdog’s claims that it had turned a blind eye to insurers’ practices, and objected to some of the specific claims in its report.

For people whose homes were affected by California’s conflagrations, the fine print in insurance policies can become a “gotcha.”

That’s what happened to Sarah Mapel, 37. The minute she saw the 1898 house nestled in the Santa Cruz mountains, Mapel felt that she was home. She bought it in 2018 — the first home she had owned — and fixed it up, doing her best “to preserve the history, beauty and uniqueness,” she said. It was her safe haven during the pandemic.

Then came the August 2020 CZU Lightning Complex Fire.

Her Boulder Creek home survived, but many of her neighbors’ houses did not. Smoke, ash and debris from burnt homes and trees permeated Mapel’s house. She was out of town for her father’s funeral. When the evacuation order was lifted after about three weeks, she returned to the house with an inspector from Fair, her insurance company. The power was still out, so they used flashlights.

“Everything was covered with ash, you could see debris in the air,” she said. “Being in there for any amount of time made me feel sick.”

The Fair report took months to arrive and said that the house just needed cleaning and an ozone odor treatment, according to a lawsuit Mapel has filed against Fair. The insurer sent her $1,150.79 and closed her case.

But the house still made her feel sick, Mapel said. She hired a public adjuster and an industrial hygienist, who both said it needed extensive remediation, including replacing all the insulation. Fair rejected those reports, she said, pointing to policy language that limits its smoke coverage to damage “visible to the unaided human eye” and detectable to the “unaided nose of an average person.”

Fair’s refusal to consider expert reports or pay for laboratory testing “is the ostrich approach to investigating insurance claims; it’s saying, ‘We just don’t want to know,’ ” said Dylan Schaffer, an Oakland lawyer representing Mapel.

Fair said it cannot comment on pending litigation.

“The Fair Plan will pay to remediate direct physical loss caused by a covered peril at properties it covers,” it said in a statement. “Our policy language in this matter was negotiated with and approved by the California Department of Insurance.”

However, that department detailed multiple issues with Fair’s policy language.

Fair may have obtained approval of policy changes “by mischaracterizing and/or omitting relevant material facts,” said a letter sent by Insurance Commissioner Ricardo Lara to Fair in January 2021. The letter noted that while Fair told the department that it had made changes that would not affect smoke coverage, it told its brokers something entirely different.

“These changes are substantive and, in some circumstances, there has been a reduction of limits and elimination of coverage,” Fair told the brokers, according to Lara’s letter.

The insurance department’s report on Fair said it had received 173 complaints from 2017 to early 2021 about Fair’s handling of claims for smoke damage. Among them, it found 59 instances when Fair illegally denied or limited coverage for smoke damage, it wrote.

Issues about smoke coverage are not just with Fair, however.

The Boony Doon house where Emily Mastellone-Snyder lived with her partner, two young children and elderly mother was also infused with smoke from the CMZ Lightening Fire, which burnt many of her neighbors’ houses as well as trees and outbuildings on her property.

“There was black soot everywhere,” she recalled of seeing the house weeks later when evacuation orders were lifted. “Smoke had just bellowed in. It was the most putrid smoke, not like sweet campfire smoke, but nasty, acrid, chemical, plastic-y smoke. Within a couple of minutes I felt ill and nauseated with a headache; it was horrible.”

Her insurer, Nationwide, paid for cleaning and smoke remediation, but she said that proved inadequate, as the smells were still terrible.

“We felt ill every time we went to the house,” Mastellone-Snyder said. She hired outside experts who recommended that they tear out and replace all the insulation; seal the attic, subfloors and ceilings; and paint the interior. Nationwide said it would not cover those expenses.

In its denial letter, Nationwide said it would not cover “any type of smoke, soot, char, ash, particles, matter, material, other byproducts or debris, or odor that is produced, emitted or released during or directly resulting from or following a wildfire or brushfire event that is undetectable by unaided human senses.”

Nationwide did not comment on Mastellone-Snyder’s case but reacted to the Consumer Watchdog report.

“This report appears to be based on an incomplete sampling of outdated policy language filings,” it said in an email. “We are fully committed to complying with all laws and regulations in the states where we do business.”

The Personal Insurance Federation of California, the industry trade group, sent an almost-identical response to the document.

“The report is also based on an incomplete sampling of outdated policy language filings,” it said. “Regardless, PIFC members are fully committed to complying with all laws and regulations in the states where they do business.”

Both Mapel and Mastellone-Snyder said they spent countless hours managing their homes’ situations and begging their insurers for help. Both ended up paying tens of thousands of dollars out of pocket to remediate their homes, and then sold them to recoup some of their expenditures and because they no longer felt comfortable living there. Both think they got lower prices because of their homes’ smoke histories.

“We felt like we were forced to sell our dream home,” Mastellone-Snyder said. “We had the heartbreaking decision, if insurance is not going to support us in getting this house clean, we’re never going to feel comfortable bringing our small kids and my mom back here.”

Both women also had to discard almost all their possessions because they were too contaminated to salvage. Mastellone-Snyder said her daughter, now 7, broke down crying the other night when she had to dispose of a chapstick, saying, “I’ll never get it back, just like my favorite stuffed animal Pearl.”

Both former homeowners are now living in rentals — and as housing costs have escalated, both think they may never be able to afford a Bay Area house again.

“I probably would have been better off had my house burned down in a wildfire” because that would have clearly been covered, Mapel said. “The amount of trauma and pain (to fight for compensation) was like having any foundation and stability just ripped out from under your feet.”

Carolyn Said is a San Francisco Chronicle staff writer. Email: [email protected] Twitter: @csaid