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Smoke Damage Is Property Damage: A Landmark Ruling for California Businesses
This post is dedicated to the late chef, Michael Chiarello, Napa Valley culinary star and Bottega restaurateur.
A recent court ruling has set a new legal precedent that could benefit businesses suffering from smoke damage. On January 10, 2025, U.S. District Judge Jacqueline Scott Corley made a landmark decision that proves that “smoke, soot, ash, char and its chemical byproducts absolutely are property damage.”
This ruling is critical for businesses impacted by the recent LA County wildfires, as it now recognizes smoke-related damage as a type of physical loss or damage, making it eligible for coverage under all-risk insurance policies.
This ruling is also particularly relevant to one of our clients, Napa Valley’s Bottega restaurant.
Bottega’s Story: A Testament Smoke Damage Claims
In 2018, Bottega suffered significant damage from nearby wildfires. While the physical structure of the restaurant remained intact, smoke infiltrated the building, leaving behind toxic residues that required extensive cleaning and remediation efforts.
Bottega filed a claim for business interruption, seeking compensation for the income lost due to smoke damage. However, their insurer, National Surety Corp., denied the claim. They argued that the smoke damage didn’t qualify as property damage under their policy.
In her January ruling, U.S. District Judge Jacqueline Scott Corley compared smoke damage to asbestos—a substance known for physically altering property—and determined that it met the criteria necessary to trigger business income coverage. This decision marks a major breakthrough for businesses like Bottega, which have been unfairly denied claims for smoke damage in the past.
The Impact of This Ruling on Businesses in Los Angeles
Beyond its importance to Bottega, this ruling has far-reaching implications for businesses in Los Angeles impacted by the recent wildfires.
Many businesses have been facing the dual challenge of repairing physical fire damage and dealing with the lingering effects of smoke. For these businesses, this ruling sends a clear message: insurers can no longer ignore or minimize claims for smoke contamination. These businesses are entitled to the same protection as those whose properties have been directly damaged by fire.
The Complexity of Business Interruption Claims
While the ruling was a victory for Bottega, it is important to note that the court didn’t fully settle the question of business interruption coverage. Judge Corley stated that a jury should decide whether Bottega was forced to shut down due to smoke damage or for other reasons unrelated to the property damage.
This aspect of the ruling underscores the complexity of business interruption claims, which often require a detailed examination of the specific circumstances surrounding each case. It’s a clear reminder of why strong legal representation is crucial in such situations.
Celebrating Chef Chiarello’s Legacy
Although Chef Michael Chiarello is not here to witness this groundbreaking judgment, his legacy lives on in the positive impact it will have on businesses facing similar challenges. His restaurant, Bottega, is not just a business—it’s a testament to his life’s work and passion. This decision serves as a reminder that smoke damage is real, it’s harmful, and it disrupts business operations in ways that require full compensation under insurance policies.
At Rubin Adjusting, we are deeply committed to helping businesses navigate the complexities of their insurance claims. We understand the frustration of dealing with insurers who attempt to minimize claims for smoke damage.