Insurance coverage

Forest Fire Insurance Coverage Series Part 2: Smoke Damage Coverage

For many policyholders, the smoke from a forest fire causes as much if not more damage than the fire itself. In this blog post in the series on wildfire insurance coverage, we discuss the damage caused by smoke from wildfires.

Some insurers claim that policies are limited to fire damage to insured property and do not include smoke damage associated with nearby fires. A treaty frequently quoted by insurers states the opposite: “The concept that fire insurance covers non-fire related damage which is the immediate result of a fire also applies when the fire breaks out on other property and causes damage to the insured property. In this case, the damage caused to the insured property, even if it is not fire-related damage, has long been recognized as resulting from a fire and, therefore, covered by the policy. »[3]

Case law has the same effect, finding that coverage for smoke loss exists under a commercial property policy that requires “physical loss or damage”. For example, one insured suffered direct physical loss or damage when a theater had to cancel outdoor performances due to “poor air quality caused by wildfire smoke”.[4] There was no permanent damage; performances were canceled solely due to poor air quality. The policyholder suffered “direct physical loss or damage to” insured property because the smoke rendered the theater “uninhabitable” and “unusable for its intended purpose”.

Businesses like wineries and vineyards face unique challenges when it comes to smoke loss coverage. When smoke from nearby fires taints the grapes, degrading their quality and diminishing their value, these businesses may seek coverage under property and business interruption insurance policies. Although insurers may recognize that property policies cover harvested grapes, the precise timing and location of the smoke smell can become an issue.[5] If smoke particles settle on the grapes while they are still in the field and the physical damage occurs before the grapes are harvested, coverage may also be available under the crop insurance policy of The cave.