California Courts Offer Path to Recovery for Indirect Fire Damage

In addition to those recovering for direct damage from the fires, policyholders affected by secondary aspects of the fire (i.e., smoke and ash damage) may also have a path to recovery.

Earlier this year, Bottega, LLC v. Nat'l Sur. Corp.-Chicago, IL, No. 21-CV-03614-JSC, 2025 WL 71989 (N.D. Cal. Jan. 10, 2025) addressed a factually analogous scenario related to fires in 2017 in Napa, Sonoma, and Yuba Counties. The plaintiff policyholder owned several restaurants that were “very close” to the fires but not within the actual burn area. As part of the state of emergency, various road closures were implemented from approximately October 9 to 18, 2017 that restricted access to the restaurants. The insurer paid these claims pursuant to the “Civil Authority” provision, but denied claims for lost income after the road closures were lifted.

The court determined that the only potential roadblock to recovery was the required causation element, which could not be addressed on summary judgment. Nevertheless, the court’s analysis provides relevant insight for those seeking coverage in similar situations. It determined that Bottega could recover for its business interruption so long as it proved “smoke, ash, and/or soot damage caused the suspension of operations at Bottega.” Id. at *5. This implies that Homeowners like those in the AAA and USAA suits could recover not only for the direct damage (cost to repair the home) but also costs incurred as a direct result of the direct damage (hotel fees incurred while the home is uninhabitable). The logic of cases like N. State Deli, LLC v. Cincinnati Ins. Co., 908 S.E.2d 802 (N.C. 2024) addressing COVID claims is also applicable. For more detailed analysis on the potential for recovery in similar situations, see our full blog post at https://lnkd.in/gEpgyaZx.