Instead, Gharibian retained L.Y. Environmental, Inc. (LY) to inspect and write a report on the damaged property. Though an engineer from LY affirmed the presence of soot and ash at Gharibian and Minasian’s property, he could find no evidence of physical damage such as rusting metal or burn damage. His opinion, therefore, was that cleaning the dwelling could be done with wipes, a special type of vacuum, and a power wash of the exterior surfaces.

Wawanesa then hired an industrial hygienist to corroborate the necessary work to clean the insured’s home. The hygienist confirmed that the interior of the dwelling could be cleaned as the engineer from LY had stated, but did not believe it was necessary to clean the HVAC system. Shortly thereafter, Wawanesa issued a payment for PuroClean’s initial cleaning estimate minus the insureds’ deductible.

Gharibian and Minasian ultimately chose to complete the necessary cleaning themselves, both the interior and the exterior, including their pool. Roughly ten weeks later, no wildfire debris remained inside or outside their home, and even the smell of smoke had dissipated. But Gharibian and Minasian hired yet another cleaning company, the Croisdale Group, to estimate how much they had spent in cleaning the house themselves, which included interior and exterior paint, insulation replacement, and cleaning both the pool and the HVAC system. The estimate exceeded $35,500.

In response, Wawanesa hired a claims service company to help settle the claim. PuroClean, the company initially hired by Wawanesa, raised its initial estimate to almost $21,000. Wawanesa made a second payment to Gharibian and Minasian, this time for just over $16,000. But when the insurer requested receipts for the expenses of cleaning the pool, the insureds did not respond. Wawanesa issued a $2,400 payment specifically for pool-related expenses, which represented the estimate provided by Croisdale.

Litigation

Shortly before Wawanesa issued the pool payment, Gharibian and Minasian sued the insurer for breach of contract and of good faith. Wawanesa filed for summary judgment, arguing the insureds had not proved the fire-related expenses fell within the policy coverage because there was “no evidence of a physical loss.” The insurer pointed out that the claims service company had found no signs of physical damage, and Gharibian himself had testified to a lack of knowledge of physical damage.

Gharibian and Minasian objected, arguing the debris from the fire had left a coat of soot and ash on their property, and that even particulate matter the human eye could not detect was capable of causing physical damage. Indeed there had to have been some sort of physical loss because Wawanesa had made multiple payments to the insureds related to cleaning their property. The trial court declared there was insufficient evidence to create an issue of material fact regarding physical damage and granted summary judgment to Wawanesa. Gharibian and Minasian appealed.

Appellate Review

The appellate judges reminded the insureds it was their burden to prove their claim fell within the scope of the policy. It was the same burden that had been required of the insured in Another Planet Entertainment, LLC v. Vigilant Ins. Co., 548 P.3d 303 (Cal. 2024), where the Supreme Court of California had determined that “direct physical loss or damage to property requires a distinct, demonstrable, physical alteration to property. The physical alteration need not be visible to the naked eye, nor must it be structural, but it must result in some injury to or impairment of the property as property” (Another Planet, emphasis added). In that case, the insured had failed to prove that particles of the Covid-19 virus had caused physical damage to its premises.

The same logic the justices had applied to Another Planet also applied to the instant case. The insureds could point to nothing that showed the occurrence of a direct physical loss. Though the presence of the ash and soot had necessitated a great deal of cleaning, that cleaning had removed all traces of it. When debris was so easily and completely removable from the property, there could not be a direct physical loss.

Gharibian and Minasian then argued that one of their experts had testified that ash was capable of causing physical damage, and ash particles had certainly been physically present at their home. The judges disagreed. The insureds had left out that the expert had pointed out that only wet ash could cause physical damage, not dry ash. The ash on Gharibian and Minasian’s property had never gotten wet.

Regarding their contention that Wawanesa would not have paid for various aspects of cleaning in the absence of a covered claim, the judges did not do so. According to an earlier appellate decision, State Farm Fire & Casualty Co. v. Superior Court, 206 Cal.App.3d 1428 (Cal. Ct. App. 1988), insurers had their own reasons for adjusting claims they way they did, whether or not those adjustments were related to coverage of the claim. Mere payment was not and could not “be construed either as an admission of liability or as the substantive equivalent of accepting its obligations under the policy.”

Conclusion

The judges declared that Wawanesa could not have breached either the policy or the duty of good faith since no physical damage had occurred. All other arguments by Gharibian and Minasian were moot. Judgment in favor of Wawanesa was affirmed.

Editor’s Note: Insurance pays for direct physical damage to property. Property that is dirty is not damaged; it just needs to be cleaned. As the judges indicated, property that needs to be cleaned of ash and soot has not necessarily been damaged.

In this case, there wasn’t an argument that Gharibian and Minasian hadn’t had to work hard to clean the blanket of ash and soot from their property, or that it hadn’t been expensive to do so. Unfortunately, other than needing a thorough cleaning, nothing else was wrong with their property.

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