Regulatory Update: California CDI Issues Notice on Coverage of Additional Living Expense for 2025 Wildfires

At a Glance

• The Notice, titled “Additional Living Expense Coverage When Homes are Uninhabitable as a Result of 2025 Los Angeles Wildfires,” clarifies that homes may be considered uninhabitable due to hazardous conditions like toxic debris, even if services like power and water are restored.

On February 14, 2025, California Insurance Commissioner Ricardo Lara issued a Notice to residential property insurers regarding Additional Living Expense (ALE) coverage for policyholders affected by the 2025 Los Angeles wildfires.

Why it Matters to Insurers

• The Notice clarifies insurer obligations regarding ALE coverage and reinforces compliance expectations under California law.
• The Notice cites California Insurance Code § 2060(b)(2), which states that ALE coverage applies when a home is uninhabitable due to a covered peril (such as wildfire), including health and safety hazards — not just utility disruptions.
• The CDI is actively monitoring insurer responses and could take enforcement actions against companies that improperly delay or terminate ALE benefits.
• Insurers must assess habitability beyond physical accessibility, factoring in health hazards (e.g., toxic debris, air quality issues and water contamination) as outlined by public health officials.
• Failing to recognize these conditions and denying ALE benefits may expose insurers to policyholder CDI complaints, lawsuits and regulatory penalties.

What Insurers Need to Do

• Do not prematurely terminate ALE coverage simply because an area is accessible.
• Continue ALE payments until a home is fully habitable per county health advisories and policy terms.
• Stay proactive in compliance efforts to avoid CDI scrutiny and potential enforcement actions.