Viewpoint: Delay, Deny, Defend for California Wildfire Claims?

Eight months after the Palisades and Eaton wildfires in Los Angeles, commercial and residential policyholders continue to report unreasonably long delays, dubious denials, and conspicuously low settlements. Most prominently, the California FAIR Plan has continued to deny or narrow smoke claims based on a supposed “permanent damage” requirement, even after a Los Angeles Superior Court rejected and the Department of Insurance publicly condemned the practice of denying these claims without investigation.

Civil lawsuits out of Palisades and Eaton alleging breach of contract, bad faith, negligence and related theories continue to be filed against FAIR Plan. Regulators have moved on several fronts. The CDI filed a formal enforcement action against the California FAIR Plan over smoke-claim practices. Other carriers are not immune to claims handling scrutiny by regulators either; the CDI opened a market conduct examination into State Farm’s wildfire claims handling.

Professionals in this market will recognize a major recurring cause of delay—bureaucratic and overburdensome claim department structures and systems.

Gone are the days when a claim was handled by a single qualified adjuster who could settle a claim or make a substantial payment on the first inspection. In today’s world, notice of loss must be given to an intake adjuster who takes down basic facts for the eventual desk adjuster who reviews the policy, file, and collects necessary information from the insured.

Next, a field adjuster or independent adjuster to inspects the property along with any necessary consultants, sometimes multiple times. Inspection reports must then be prepared and submitted to a carrier quality review team that requests, requires, or itself changes the reports to comply with confidential company guidelines. Once completed, the desk adjuster completes an additional report requesting authority to make a payment from a manager or supervisor. Even with changes to California laws in 2021 and 2022, insurance companies have struggled to comply with timely claim investigation and adjustment for several reasons.

This bureaucratic process causes claim delays even under normal settings. Adjusters are routinely overburdened with high claim loads, and claim departments are reported to be routinely understaffed and delayed with the training of new hires.

More problematic, policyholders are reporting frequent adjuster changes and multiple adjusters working different portions of claims; for example, a single claim may have one person adjusting building damage and another adjuster addressing damage to personal property (contents). These adjustment teams often do not communicate because they are working remotely, frustrating insureds who must convey information to two different adjusters. Many claimants in Palisades and Eaton report that the already burdensome process has been interrupted or even restarted multiple times as adjusters are cycled in and out mid-task with no warning.

Carriers also fuel delay and disagreement by almost reflexively rejecting opinions from the insured’s retained experts or contractors. A large share of claimants pay out-of-pocket for professional opinions on scope and cost after the carrier refuses to or delays doing so, only to have those opinions dismissed, and then see the carrier hire its own consultants (even those it previously refused to hire) and see them reach different conclusions. Carriers are then reluctant to try to resolve the disputes between the competing consultants and side with their own. They argue in court that simply having a consultant opinion on file, even if wrong, should insulate them enough from meaningful legal liability.

There are explanations besides a deliberate “delay, deny, defend” playbook, but the root causes often trace to these structures and systems that carriers control, including thin staffing relative to surge, authority segmented high in the organization, and burdensome documentation checklists. Adjusters report high caseloads, limited authority, and slow management response times on payment requests—conditions that almost guarantee cycle-time drag.

Coverage communications also remain a pain point. Many policyholders receive confusing, boilerplate, legalese-heavy communications that are light on claim-specific facts and sometimes contain errors. Oftentimes, these letters tell the insured there is no coverage or the carrier disagrees with them.

“Smoke claims” are presenting the most significant challenge. In March, the CDI directed carriers not to summarily deny smoke claims and to order appropriate testing at the carrier’s expense when warranted. The department’s bulletin and subsequent task force made clear that smoke/soot/ash are fire losses that require a documented, science-based investigation, not a visual-or-odor quick screen.

Even worse, many policyholders have retained consultants who have opined that, in addition to smoke, soot, and ash, their homes contain lead, asbestos, or other harmful metals like arsenic, beryllium and cadmium. As such, complaints remain abundant. For example, the California FAIR Plan appears to be continuing to rely on a “permanent damage” requirement for smoke claims even though courts, the state, and legal scholars tend to agree it’s unlawful.

The CDI recently issued an Order to Show Cause against FAIR Plan, alleging at least 418 violations, including misrepresentations of coverage and failures to conduct reasonable investigations, hallmarks of system-level process defects rather than one-off errors. If those allegations are sustained at the hearing, CDI can seek fines and corrective orders requiring process changes (such as testing protocols, communications standards, authority ladders). Where CDI confirms widespread violations, property should hope to see mandatory corrective action and public orders that improve transparency and file handling—though change will take time as carriers re-tool workflows. Longer term, the combination of judicial rulings, civil lawsuits, and CDI enforcement should push the market toward adopting more efficient claims adjustment models.

Operationally, California carriers should realign workflows: front-load investigations; accelerate report-to-decision timelines; and empower field and desk teams with clearer authority ladders. On smoke claims, expect more testing and post-remediation verification paid by carriers when indicated by the facts. Practically, without improved cycle-time discipline, litigation and mistrust will grow, a trend already visible in L.A. wildfire filings over alleged delays and denials. The professional takeaway is simple: the law already requires prompt, specific, fact-driven adjusting. Executing that consistently is now both a regulatory imperative and a reputational necessity.

Veroff is an attorney in the Merlin Law Group’s San Francisco office. He is also licensed in Oregon and Washington and has co-counseled matters in Colorado, Nevada, Florida and other states. He represents property owners in large loss insurance claim disputes, underinsurance matters, and agent/broker/underwriter negligence.

Chaiken is an experienced trial attorney who has dedicated his practice to representing home and business owners in recovering compensation from insurers and third parties when their property has been damaged. He is licensed to practice law in all of the state and federal courts in California.

Topics Catastrophe Natural Disasters California Wildfire Claims

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