| By Michelle Ma Months after fire tore through Los Angeles’ Pacific Palisades neighborhood, homeowners are struggling to get reimbursed — not for houses reduced to rubble, but for the damage of smoke and toxins in the properties that remain. For residents such as Keri Homolka, fighting for a payout has become a full-time job. The Jan. 7 blaze caused the window frames of her home to buckle and crack. Paint on the walls bubbled. While the residence was spared from total destruction, its insides were tarnished by ash and soot, residue from the burned-out houses on either side. The 76-year-old retiree and her husband, who have owned the home since 1999, spent more than $100,000 on testing, cleanup, hotel stays and repairs after discovering elevated lead levels in the dust. Homolka said their insurer, California’s FAIR Plan, has paid just $15,000 of their claim. “We’re bleeding money,” she said. “We’re back in our home, but it’s just not fair. You pay all this money for insurance, and then it’s nothing.”  Keri Homolka and her husband, Larry, at their home in Pacific Palisades. Photographer: Alisha Jucevic/Bloomberg Although their homes might still be standing, many victims of the January fires now find themselves navigating similar insurance ordeals, from costly and time-consuming delays to outright claim denials. While multiple insurance providers have been the subject of complaints, the California FAIR Plan is under particular scrutiny. The state’s insurer of last resort is facing an investigation by the California Department of Insurance as well as lawsuits from policyholders. As of May, the Department of Insurance’s consumer services division had received about 120 complaints regarding FAIR’s handling of smoke damage claims related to the LA-area wildfires. The situation is so difficult that some homeowners say they wish their house had simply burned down, said Michael Soller, the department’s deputy commissioner of communications. “That’s a terrible place to be,” he said. In a ruling Tuesday, a Los Angeles Superior Court judge said FAIR’s treatment of smoke-damage claims violates state law, providing less coverage than what is required due to its definition of “direct physical loss.” The ruling from a 2021 lawsuit could have far-reaching implications for the insurer's handling of smoke-related claims. FAIR spokeswoman Hilary McLean said in a statement Wednesday that the plan’s smoke coverage aligns with its coverage of burn damage in requiring direct physical loss. “All FAIR Plan burn damage and smoke damage claims are handled consistent with California law,” she said in response to the ruling. The LA-area wildfires have placed in stark relief the challenges of barebones insurance policies at a time when traditional insurers are pulling back from areas prone to climate disasters. The FAIR Plan accepts properties that private insurers have deemed too risky to cover. FAIR Plan policies grew by 85% last year in a ZIP code central to Pacific Palisades. In that same area, State Farm, California’s biggest insurer, cut nearly 70% of its policies, including Homolka’s. The Department of Insurance earlier this month launched a separate probe into State Farm’s handling of claims from the Palisades blaze and the Eaton Fire, which nearly leveled the community of Altadena northeast of Los Angeles. Among the complaints filed to the insurance commissioner are disputes over how the company is handling smoke damage claims, Soller said. In a June 12 statement posted on its website, State Farm said it is cooperating with the Department of Insurance and will comply with the agency’s market conduct exam process. “A fair review will find that thousands of State Farm customers are being helped by our teams on the ground in Los Angeles County and are very satisfied,” the insurer said.  A burned area on the side of the Homolkas’ home in Pacific Palisades. Photographer: Alisha Jucevic/Bloomberg As of May, FAIR had received more than 5,000 claims for damages caused by the Eaton and Palisades fires, of which more than half are reported as partial loss, including smoke damage. The higher share of complaints have come from Pacific Palisades, given the plan’s dominance in that area. The plan said that as of early May it had paid $2.7 billion in claims, including for smoke, tied to the blazes. Last month, the Department of Insurance sent a letter to FAIR demanding that it amend its policy and investigate smoke damage claims fairly. The department has deemed FAIR’s policy provisions as “void and unenforceable” because they don’t provide the minimum level of coverage as mandated by California law, according to the letter. “The language in their policy form differs from every other insurance company and standard language,” Soller said. “Putting people back in a home that isn’t safe is not acceptable.” Elise Klein, FAIR’s chief legal officer and general counsel, said in response that the insurer disagrees with some of the department’s claims and that it will work to reach an agreement on language about smoke coverage. “Since last year, we have been working collaboratively with the California Department of Insurance to update and clarify our policy language around smoke damage, so the language is consistent with the manner in which these claims are being adjusted,” FAIR’s McLean said. “Our goal is to continue providing fair and reasonable coverage for wildfire-related losses while maintaining the financial integrity of the FAIR Plan for all policyholders.” Continue reading the full story on Bloomberg.com. | 
