As homeowners and businesses undertake the long process of recovering from an estimated $200 billion in damage from the Los Angeles wildfires, they look for coverage from insurers that face the prospect of having to pay out enormous sums.
Marc Ladd, a partner at Cohen Ziffer Frenchman & McKenna in New York, where he represents corporate policyholders, took questions from Westlaw Today about how insurers might respond to the onslaught of claims; how court rulings in COVID-19 coverage cases might come into play; the effect on California’s FAIR Plan; and more.
Westlaw Today: Over the last several years, we’ve seen numerous court rulings interpreting the phrase “direct physical loss or damage” in the context of COVID-19 coverage litigation. How might those precedents apply to litigation over coverage for nonphysical damage to properties from the wildfires, such as smoke, soot and odors?
Marc Ladd: Overall, insurance companies may try to categorize soot or smoke damage as the same thing as COVID-19 to deny coverage for lack of physical loss or damage. However, damage from soot and smoke has long been held to cause physical loss or damage that can be seen and must be cleaned. Indeed, many homeowners policies specifically say they cover damage from smoke. A bigger question is whether any insurers will attempt to claim that smoke damage should fall under a traditional pollution exclusion.
WT: How do estimates of the Los Angeles wildfire losses compare with losses from previous wildfires and other natural disasters?
ML: The projected losses are at around $250 billion, due to the value of the property involved. That would make it the most expensive wildfire in U.S. history.
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