For many wildfire claims, the two-year anniversary starts the extension analysis rather than ending coverage

Many Palisades and Eaton fire survivors are being told, or fear, that additional living expense coverage will end on January 7, 2027, exactly two years after the fires. That date matters. It is not an automatic expiration date.

California law gives policyholders more protection than a simple two-year cutoff. Insurance Code section 2060 establishes a minimum time window, requires additional time when reconstruction is delayed by circumstances outside the policyholder’s control, and requires further six-month extensions for good cause. A newly enacted law adds another important protection for covered wildfire smoke claims beginning January 1, 2027.

January 7 Is a Milestone, Not an Automatic Cutoff

For a covered loss related to a declared state of emergency, section 2060 says additional living expense coverage must be available for no less than 24 months from the inception of the loss, subject to other policy provisions. For many Palisades and Eaton claims, January 7, 2027, will be the 24-month point. The precise date may differ if the inception of the covered loss was later.

The two-year mark is therefore the end of the initial statutory period. It does not allow an insurer to impose a blanket cutoff without considering extension rights, the condition of the property, the cause of the delay, the remaining policy limit, and the policy language.

California Law Allows More Time

Section 2060 requires an insurer to grant an extension of up to 12 additional months, for a total of 36 months, when a policyholder acting in good faith and with reasonable diligence encounters reconstruction delays caused by circumstances beyond the policyholder’s control. The statute identifies unavoidable permit delays, unavailable construction materials, and unavailable contractors as examples. That list is not exclusive.

In the Palisades and Eaton recoveries, the record may also include delayed claim decisions, repeated inspections, disputes over testing or remediation, unresolved repair scopes, delayed payments, design review, permitting bottlenecks, and shortages of qualified contractors. Any of those circumstances may support an extension when the evidence shows that the delay was outside the policyholder’s control.

The statute then says additional six-month extensions shall be provided for good cause. The California Department of Insurance summarizes the rule as 36 months plus six-month extensions for good cause. Policyholders should not assume that the first extension, or a later six-month extension, will happen automatically. They should request it in writing and support it with a clear chronology and documents.

A New Rule for Wildfire Smoke Claims

The timing is especially important for owners of standing homes with unresolved smoke damage. In September 2026, California enacted the Smoke Damage Recovery Act. The law adds Insurance Code section 2060.1 and becomes operative on January 1, 2027, six days before the two-year anniversary of the fires.

Section 2060.1 provides that an insurer may not terminate additional living expense coverage for a covered residential wildfire smoke damage claim within the wildfire impact zone until the property has been restored to its preloss condition and cleared for human occupancy under the applicable standards. The protection remains subject to the policy’s dollar limit.

The Legislature expressly identified the January 2025 Eaton and Palisades fires in the act’s findings. Section 2060.1 does not say that it applies only to losses occurring after January 1, 2027. By contrast, the next section enacted in the same bill, section 2060.2, expressly limits its application to claims occurring on or after its operative date. That textual difference is significant.

In my view, section 2060.1 should govern an insurer’s attempt after January 1, 2027, to terminate ALE on an ongoing covered smoke damage claim from the Palisades or Eaton fire. Insurers may contest that interpretation. Policyholders with unresolved smoke claims should preserve the issue before any cutoff and should demand a written explanation of how the insurer contends the new statute applies.

The Policy Limit Still Matters

More time does not create more insurance dollars. Section 2060 and the new smoke claim statute remain subject to applicable policy limits. If the ALE limit is exhausted, a time extension does not replenish it. Policyholders should obtain a current payment ledger, confirm the remaining limit, and calculate the likely exhaustion date based on current housing and other covered expenses.

ALE also covers the reasonable increase in living expenses caused by the covered loss. It is not a guaranteed payment for 24, 36, or more months regardless of circumstances. Coverage may end earlier if the home becomes reasonably habitable, the insured no longer incurs covered additional expense, or another policy condition ends the entitlement. The policy may also provide broader protection than the statutory minimum.

What Policyholders Should Do Now

Policyholders should address the issue months before January 7, 2027. A useful written request should do the following:

  • Confirm the numbers: Ask for a complete ALE payment history, the remaining dollar limit, the current monthly burn rate, and the insurer’s projected exhaustion date.
  • Request the extension: Identify section 2060, state the period requested, and explain why the home cannot yet be occupied, or the reconstruction cannot yet be completed.
  • Prove the delay: Create a dated chronology of inspections, testing, estimates, scope disputes, payments, permits, contractor availability, and other events that affected the work.
  • Show reasonable diligence: Preserve bids, applications, contracts, follow-up emails, repair schedules, and other evidence showing continued efforts to move the claim and reconstruction forward.
  • Address smoke claims separately: For a covered claim within the wildfire impact zone, cite section 2060.1 and request the insurer’s plan to restore the property to pre-loss condition and clear it for human occupancy.
  • Demand a written basis for any cutoff: Require the insurer to say whether it relies on a time limitation, exhaustion of the dollar limit, habitability, or another policy provision. Those are different issues and should not be blurred together.
The Bottom Line

A blanket statement that Palisades or Eaton ALE expires on January 7, 2027, is wrong. Some claims may end by then because the available dollars have been exhausted or the property is habitable. Other policyholders may be entitled to as much as another year, additional six-month extensions for good cause, or the separate protection for covered smoke claims until the property is restored and cleared for occupancy.

The answer requires a claim-specific review of the policy, the ALE ledger, the condition of the home, the cause of the delays, and the evidence of the policyholder’s diligence. The calendar alone does not decide the issue.

Primary sources

California Insurance Code section 2060  |  California Department of Insurance ALE consumer alert  |  Assembly Bill 1795 Smoke Damage Recovery Act  |  Assembly Bill 1642 Wildfire Environmental Safety and Testing Act  |  January 7, 2025, State of Emergency Proclamation