Wildfires continue to present serious risks for California property owners. Unfortunately, commercial property owners, corporate facilities, landlords, and homeowners need to overcome not only the flames themselves, but also remediating hazardous contamination against a backdrop of unpredictable and ambiguous environmental safety standards. In response to the destructive Los Angeles area fires in 2025, the California Legislature recently introduced Assembly Bill 1642 aimed at creating uniform science-based standards for evaluating, testing, and clearing wildfire-impacted properties.
While A.B. 1642 is in its early stages of consideration, it could materially influence claims handling, remediation costs, risk management practices, and broader liability exposures for California policyholders.
A.B. 1642’s Objectives
There are currently no uniform, statewide science-based standard for environmental testing, contaminant removal, or clearance for property re-occupancy after wildfires in California. This has created a “Wild West” where insurers unilaterally determine what contaminants to test for and what level of cleanup is reasonable. Many times, those tests conclude that a mere “wipe down” is sufficient with no follow up testing needed. However, insurer-selected testing standards and remediation creates ambiguity, leaving room for remnants of contaminants on properties including asbestos, mercury, lead, arsenic, and other toxic metals.
In many cases, policyholders are left facing the decision of whether to fund substantial costs to conduct their own testing (and remediation that the insurer may or may not agree to cover), or risk exposure to unsafe conditions. There is a great deal of uncertainty over what constitutes a safe property following a fire, especially where there are buildings with complex interior facilities or contents.
A.B. 1642 aims to establish regulatory standards, without insurer influence, for investigating, testing, and removing contaminants in homes, schools, and workplaces. Rather than rely on insurer-established protocols that can be skewed unfavorably to policyholders, the bill entrusts the Department of Toxic Substances Control to adopt science-based regulatory standards.
Discussion
Though presented as a public health measure, A.B. 1642 could have a broader impact on insurance recovery, claims handling, and risk management for commercial policyholders, such as real estate investors, commercial and residential landlords, and retail businesses. There are several potential implications that policyholders should be aware of as the bill progresses:
- Clearer Guidelines For Remediation and Reopening: Many policyholder-insurer disputes in wildfire claims arise from the environmental testing and cleanup necessary to remediate harmful contaminants. A.B. 1642 should establish clear, science-based standards, reducing subjectivity and minimizing coverage disputes over the scope of remedial work. Additionally, the bill helps businesses know when it is safe to resume operations, reducing uncertainty and delay in making those decisions.
- Objective Evidence of Physical Loss or Damage: Mandatory science-based testing and clearance standards for determining what constitutes unsafe property conditions could also provide objective evidence that wildfire-related contamination, like contamination from smoke damage, creates a distinct, demonstrable, physical alteration of property. Insurers, at times, may thwart legitimate claims based on the insurers’ preferred standards for “safe” levels of contamination. Regulatory standards, in contrast, would even the playing field. Objective clearance standards could show that property is unsafe to return to, making it unusable for its ordinary purpose and inhabitable. Likewise, regulatory standards could show that wildfire-related smoke and debris—that otherwise may have been ignored under insurer-created metrics—caused covered physical loss or damage because they contaminated property.
- More Restrictive Underwriting and Increased Insurance Costs: Policyholders are already implementing wildfire mitigation techniques into their property maintenance and development because of their impact on insurance premiums and coverage acceptance. A.B. 1642’s standards could incentivize insurers to require more onerous loss control and mitigation procedures or impose additional testing and cleanup requirements as part of underwriting insurance eligibility. Additionally, mandatory testing and clearance may raise insurers’ claim costs for expanded testing, specialized environmental consultants, deeper cleaning protocols, and extended business interruption coverage. Insurers’ increased underwriting scrutiny and claim costs could, in turn, increase policyholders’ due diligence costs to acquire insurable properties or hinder property sales in high-risk areas.
- Evidence of Business Interruption and Extra Expense: Commercial property policies may cover business interruption and extra expense damages when operations are suspended due to covered physical loss or damage. A business’s greatest losses may not be property repair but rather the adverse impact of property damage on their business operations, which can include facility closures, or tenant displacement. Undefined standards for when a property is safe to resume its operations leads to conflicts over the covered duration for business interruption and extra expense losses. However, objective regulatory standards for determining whether properties are unsafe following wildfires may assist policyholders in establishing coverage for the duration of their inability to use property.
If passed, A.B. 1642’s impact on policyholders will depend on several factors, including the bill’s final regulatory language, judicial interpretation, and the insurer response in underwriting, covering, and handling claims for California property owners. We will continue to monitor developments with the bill and other legislation aimed at bolstering wildfire-related insurance claims standards in California.