The following is a guest blog post by John E. Putnam, CPCU, ARM of Putnam Assurance & Risk Services, LLC in Colorado Springs, CO. You can follow his blog at  


In a blog post on the Property Insurance Coverage Law Blog, Daniel Veroff wrote about a court case in California that barred Homeowners polices from having separate sub limits for wildfire smoke claims in that state. Apparently, several large California insurers were using endorsements that limited wildfire smoke claims to $5000, likely due to that state’s recent history of increased wildfires.

As many of you know, I served on the post-Waldo recovery team, Colorado Springs Together, as their insurance consultant and claims ombudsman. As shared in other forums, the learning opportunities that I gained from this experience just keep on giving and challenging my traditional insurance outlook. In retrospect, I must admit I was not prepared for the contentiousness and expense of the smoke claims which caused more post-loss controversy than settling large total losses.

When laypersons think of wildfires, they visualize the massive destruction they see on television and social media where the resulting neighborhoods look like a bombed community. What is hardly visual unless you have worked a wildfire event is the smoke damage to the buildings adjacent to the fire that survived the catastrophe. In many wildfires, the number of smoke claims outnumbers the total losses and causes very expensive remediation. Like all catastrophic claims, it is difficult to generalize about certain post-loss attributes, so it is important to examine the characteristics of each catastrophic event to identify what characteristics might cause different losses.

The Waldo Canyon Fire is a case in point. Human-caused, the fire burned four days before damaging any residential properties. During these four days, the direction of the fire meandered based upon the changing wind directions. On the fourth day, the winds were quite strong causing the fire to accelerate its burning and creating a pyro-cumulous cloud which collapsed on the afternoon of June 26, 2012. This cloud collapse caused hurricane force winds which drove a branch of the wildfire down the mountains into the densely populated Mountain Shadows neighborhood, 347 homes burned in a very short time frame causing very hot temperatures and very dense smoke.

Why do these fire characteristics matter to our discussion on smoke? Consider the following reasons:

  1. The hurricane force winds in excess of 70 MPH accelerated the spread of this fire and caused two concentrated areas of conflagration with very high temperatures (another hidden peril) and considerable smoke.
  2. The densely populated neighborhood was more susceptible to the high concentrations of smoke than had this fire occurred in a less populated area.
  3. The resulting smoke was not just organic material but included a mixture of smoke particles from all the inorganic materials often found in today’s homes.

Interestingly, it is hard to find exact data on the number of smoke claims and their severity following this fire. However, I do know their adjustment was very problematic and led to many complaints with the Colorado Division of Insurance largely based on smoke claim handling.

Note: In June 2013, the Black Forest Fire burned just east of Colorado Springs in a more rural setting and over a week’s time with less intense winds. The testing showed much less smoke damage resulting from this event. Takeaway: damage depends on each catastrophe’s peculiar characteristics.

What lessons were learned?

  1. There are two types of smoke that result from a wildfire:
    1. Organic smoke i.e. the wildfire smoke itself and the smoke from a fireplace or campfire which is usually less damaging; and
    2. Inorganic smoke which causes an oily film and is more difficult to clean and remediate. In addition, this smoke may contain other contaminants which may create additional environmental risks for persons with respiratory conditions.
  2. A couple of carriers argued that there was not “direct” smoke damage that resulted from this wildfire. I must confess that I never understood this argument and still don’t. After creating considerable policyholder distress and many Division of Insurance complaints, these carriers changed their stance on this argument about seven months into the recovery period.
  3. Very few protocols are in place to determine the extent of damage and the amount of remediation that would be necessary. Into this vacuum, several public adjusters with experience with smoke claims from other states offered policyholders strategies to make their claims. When these claims were still not paid to the satisfaction of the policyholders, the public adjusters turned to the appraisal condition in most policies to seek adjudication. While most of those settlements are not public, I understand several amounted to very large monetary settlements.
  4. There are definite and different psychological impacts associated with survivors with total loss claims and those who had partial damage. Wildfire survivors who lost their houses are getting them replaced. Partial loss smoke claimants are only getting their properties cleaned which in many respects was poorly done. Their impression is that they are not being made whole after the loss. They also feared the potential for having to do further remediation at some future date when they go to sell their homes.

Based upon this blog, it appears that some insurance companies elected to endorse sub- limits onto their policies to control their costs on these smoke claims rather than to develop better methods to adjust them. To date, I have not heard whether these endorsements exist beyond California nor how the California companies using them will respond to this court decision. Could smoke become the next “mold” type problem where the policy limits protection but you can purchase more? Are there other solutions to this problem? With the call for the insurance industry to become more innovative and customer centric, perhaps they can investigate other more creative solutions to this hidden wildfire peril.

Overall, I was amazed at how well the insurance mechanism worked to help customers recover from their total losses. In fact, within three years, the Mountain Shadows neighborhood was over 90% rebuilt. However, a question remains for several companies…was there a better way to handle the outlier smoke claims like their competitors found? It sure would be great to create better smoke damage claim protocols rather than depend upon exclusions to limit coverage. Hopefully, the continued learning process following each wildfire event will find more and better solutions to this issue.

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Bill Wilson

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One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information