California’s New Smoke Damage Recovery Act: Shifting the Burden

October 13, 2026

Two bills recently signed into law by Governor Newsom, enacted as the “Smoke Damage Recovery Act,” may represent an inflection point in the relationship between California and insurance carriers amid escalating wildfire losses and declining insurance availability.

Background

In California’s spate of recent wildfires, thousands of residential properties that survived the blaze have nevertheless been affected by smoke, soot, char, ash, and contaminants. Thousands of smoke damage insurance claims have been filed as a result. The lack of clear standards for the testing and remediation of smoke damage has prompted complaints from numerous homeowners that their insurance claims have been improperly denied, along with their requests for post-remediation testing to ensure their homes were restored to pre-loss conditions of air quality.

The enactment of the Smoke Damage Recovery Act was fast-tracked, in large part, by the June 2026 Lineage Logistics fire in Los Angeles. The Legislature declared that the Lineage fire “exposes the gaps in insurance coverage that exist in the absence of a mandatory evacuation order, even when conditions may render a home uninhabitable, and the need to modernize insurance protections for vulnerable communities facing smoke, odor, and environmental contamination as a result of complex, urban, industrial disasters. Without a mandatory evacuation order and the insurance coverages triggered thereby, residents may have no choice but to remain in their homes despite unsafe and unhealthy conditions and impacted businesses may suffer financial losses.” Cal. Health & Safety Code § 25544 (a)(9)

The New Code Sections

Assembly Bill 1795, to be codified under Insurance Code Section 2060.1 and Section 2060.2, goes into effect on January 1, 2027 and will apply to claims arising from wildfires with respect to residential properties within any zip code deemed to have been in a wildfire impact zone. If smoke, ash, soot, char, or combustion byproducts are present in a surviving residential property in the impact zone after the wildfire, Section 2060.1 establishes a rebuttable presumption that smoke damage is the result of that wildfire. Insurers may rebut the presumption and prove otherwise, but they will bear the costs of doing so and must do so under tight deadlines.

A.B. 1795 also enacts Insurance Code Section 14048, which will require, as of July 1, 2029, that adjusters must be certified in order to handle smoke damage claims. The California Department of Insurance will be responsible for the development of training and certification of adjusters. Assigning an uncertified adjuster to handle a smoke damage claim will be deemed an unfair claims practice under the Insurance Code.

Assembly Bill 1642, to be codified under Insurance Code Section 2061.1 (a) classifies smoke damage as an air-quality threat and provides that additional living expense policy benefits cannot be terminated until a dwelling “has been restored to pre-loss condition and cleared for human occupancy, in accordance with the regulations or guidance described in Section 25402.3 of the Health and Safety Code … subject to the applicable policy limit.”

Takeaways

If an insurer senses that smoke damage did not arise from a wildfire in the impact zone, the new statutes place the burden on insurers to investigate and perform tests to prove it. The insurer must do this within 30 days of the notice of claim (unless site access is restricted). Regardless of the findings, any undisputed costs to restore must be paid within 30 days of the testing. Additionally, an insurer may not terminate coverage for additional living expenses (up to policy limits) until testing proves that the air quality of a residence is safe for human occupancy.

Formalizing standards for smoke damage as an air contaminant is an important development in the evolving arena of California insurers, wildfires, and state regulations. The new bills place increased burden and costs on insurers and their strategies for absorbing those remain to be seen. Stakeholders will want to monitor those developments as well as legal activity that will clarify the regulations, especially as they relate to the coming certification process for adjusters. The law goes into effect for residential claims arising after January 1, 2027, but designated new programs for training and certification for smoke damage adjusters are not required until July 1, 2029.

Of course, we will keep an eye on this as it develops as well.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm or its clients. This article is for general information purposes and is not intended to be and should not be taken as legal advice.