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.

Some insurers argue that policies are limited to fire damage to the insured property and do not include smoke damage associated with nearby fires. A treatise frequently cited by insurers states otherwise: “The concept that fire insurance covers non-fire damage which is the proximate result of fire finds application also when the fire occurs on other property and causes harm to the insured property. In such case, the harm to the insured property, even though it is a non-fire harm, has long been recognized to be the result of fire, and, therefore, within the policy coverage.”[1]

Case law is to like effect, finding that coverage for smoke loss exists under a commercial property policy that requires “physical loss or damage.” For example, a policyholder suffered direct physical loss or damage where a theater had to cancel outside performances because of “poor air quality caused by the wildfire smoke.”[2] There was no permanent damage; the performances were cancelled solely because of the poor air quality. The policyholder suffered “direct physical loss of or damage to” insured property because the smoke made the theater “uninhabitable” and “unusable for its intended purpose.”

Businesses like wineries and vineyards face unique challenges with respect to coverage for smoke loss. When smoke from nearby fires taints grapes, degrading their quality and decreasing their value, these businesses may seek coverage under property and business interruption policies. While insurers may acknowledge that property policies cover harvested grapes, the specific timing and location of the smoke taint can become an issue.[3] If smoke particles settle on the grapes while they are still in the field with the physical damage occurring before the grapes are harvested, coverage may also be available under the winery’s crop insurance policy.

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This is the second post in the Blog’s Wildfire Insurance Coverage Series.

*This post is an excerpt from an article written by Scott DeVries and Yosef Itkin that originally appeared in the Journal on Emerging Issues in Litigation published by Fastcase Full Court Press, Volume 2, Number 3 (Summer 2022), pp. 213-222 (a comprehensive list of all references is provided in the published journal version). 

[1] 10A Steven Plitt, et al., Couch on Insurance 3d §149:34. (1995 updated 2019).

[2] Oregon Shakespeare Festival Ass’n v. Great Am. Ins. Co., 2016 WL 3267247, at *2 (D. Or. June 7, 2016), vacated on parties’ request, 2017 WL 1034203 (D. Or. Mar. 6, 2017).

[3] See e.g., Hoopes Vineyard LLC v. U.S. Fire Ins. Co., 21:cv-09755 (N.D. Cal. Dec. 17, 2021) (involving a claim by a winery for wine loss due to smoke damages and an issue of whether the damage occurred after the wine was harvested).