Attorneys eye mass torts against insurers over fire claims

Insurance companies are dragging their feet and underpaying claims stemming from the wildfires that destroyed large tracts of Altadena and Pacific Palisades in January, plaintiffs' attorneys say.

Lawyers say the practice appears to be more prevalent in situations where the property is not a total loss. It could become worse when the full extent of the damage is known, they said. And given the costs of litigation, it may not make financial sense for a homeowner to sue over unreimbursed claims of $50,000 or so in contents loss or building damage.

But mass torts with common facts may be the way forward, the attorneys said, though none appeared to have filed yet.

The Eaton Fire alone is estimated to have caused $10 billion in property damage, according to insurance companies' estimates. A recent appellate ruling could make it more difficult for homeowners to collect damages from their insurance companies.

Attorneys did not name any insurers, but State Farm's clients have said that the company is offering to pay only fractions of what it costs to repair and clean homes that were damaged by the Eaton and Palisades fires and described its claims process as difficult and frustrating. Customers have also complained in news reports about being required to itemize the contents of their homes for reimbursement.

State Farm representatives did not respond to requests for comment. Its website says it has the largest "claims force" in the industry and is "bringing the full scale and force" of its "catastrophe response teams" to help customers. It also says it has received more than 12,000 fire and auto claims related to the fires and has paid over $2.2 billion to its customers.

In February, a 2nd District Court of Appeal panel ruled that homeowners who filed claims stemming from the 2019 Saddle Ridge fire were not entitled to loss of property damages from their insurance company because they failed to show that smoke, soot and ash from the fire altered their property in a lasting manner. Plaintiffs' attorneys fear that Hovik Gharibian, et al. v. Wawanesa General Insurance Company, B325859 (2nd Cal. App, filed Feb. 7, 2025) could put their clients at a disadvantage when they file a claim.

"Just yesterday a client told me that the [California] Fair Plan won't pay for remediation on his property, saying they don't cover smoke and ash damage, they only cover physical damage. Insurers are not citing Gharibian directly, but it's eerily coincidental they're using 'physical damage to property,'" Kabateck LLP's managing partner, Shant A. Karnikian said.

This client is a doctor who is "keenly aware" of the risks of living in a contaminated home, Karnikian noted. His concerns go well beyond contamination that occurs when organic material is burned.

"It's your neighbor's lithium-ion in batteries in their Tesla or Prius. They're taking the position that regardless of the type of material in there, it hasn't physically altered the home," Karnikian said. "Where do we draw the line on this position? Do we have to get down to the molecular level and prove it was chemically altered?"

Similar arguments by insurers have won most of the claims from business owners stemming from the COVID-19 pandemic. Courts have agreed that the presence of a virus on a table, door or wall is not permanent damage. The same argument might be made for ash and chemicals.

Reed Smith LLP's insurance recovery group set up an online portal and intake form after the fires broke out to answer questions about insurance plans and point people in the right direction. They were asked to fill out their names, contact details, and upload relevant documents. A Reed Smith attorney would then follow up with general information about the policy. They helped about 80 people directly through the portal and about 500 through online training, the firm said. The initiative also helped Reed Smith's attorneys see how insurance companies were handling claims, and which companies were pushing back.

"We're worried that undereducated policy holders will accept less than they're entitled," Reed Smith partner Benjamin Fliegel said. "Insurance companies are being pretty aggressive about what is covered and not covered, and most importantly the cost of repair."

Fliegel said there is a large gap between the actual costs to clean and repair damaged homes, and what insurance companies are offering.

"Some companies are juicing insurance, but it's not about what should it cost but what it costs. Most clients don't want the money, they want their property cleaned. They don't know whether to hire the company and wait for payment," Fiegel said.

"It's hard to know now if what they're doing now is illegal. If the system is burdened and takes longer, that's not illegal. If they're dragging things out, that's illegal," he continued.