Smoke damage claims are never really about smoke. They are about trust, proof, judgment, and whether insurance will honor its promise when loss does not arrive in neat, charred packages. A New York case decided nearly two decades ago, Positive Influence Fashions, Inc. v. Seneca Insurance Company, reads today like it was written as a lesson for me and for the thousands of policyholders now navigating smoke damage claims after the Los Angeles wildfires.
The dispute arose from a fire several blocks away from a garment manufacturer’s warehouse. There were no flames in the insured’s building. No dramatic fire suppression footage. Just smoke and soot that infiltrated the space and, according to the insured, rendered nearly all of its inventory unsaleable. The insurer disagreed, paying only a fraction of the claim and accusing the policyholder of fraud, failure to cooperate, and even spoliation of evidence.
The insured’s position was grounded in real-world market consequences. People in the garment industry, including a public adjuster and a distressed-goods buyer, explained that smoke exposure destroys merchantability. Clothing does not have to be visibly blackened to lose value. Odor migrates. Retailers reject goods. Once smoke sets in, the market responds harshly. The policyholder acknowledged salvage value and did not claim that everything was physically destroyed, but it did claim that everything was damaged in a functional and economic sense.
The insurer took a far more absolutist approach. It argued that most of the inventory was boxed or wrapped, that no visible soot was found, and that the insured did not open and inspect every item. From that, the insurer leapt to accusations of false swearing and intentional fraud. It argued that because some records were later discarded during the collapse of the insured’s business, the entire case should be dismissed. This very aggressive step of accusing policyholders of fraud following smoke claims is a common strategy still employed in more recent fires.
The courts were not persuaded. Both the trial court 1 and the Appellate Division 2 rejected the insurer’s attempt to end the case on summary judgment. The appellate court made several points that matter greatly today. First, the insurer failed to meet its heavy burden of proving that the insured’s statements were willful and intentional misrepresentations. The court recognized that the insured may have acted in good faith based on professional opinions that smoke exposure rendered the goods unsaleable. Second, disputes over cooperation and document production were factual issues, not legal silver bullets. Third, while the destruction of documents was not ideal and could possibly justify some lesser sanction later, dismissal of the case was far too extreme.
In plain terms, the court acknowledged something insurers often resist admitting. Smoke damage is not limited to what can be photographed easily. Damage can be economic, functional, and market-driven. Good faith matters. Reasonable disagreement does not equal fraud.
These lessons are directly relevant to Los Angeles wildfire losses. Thousands of homeowners and business owners are being told that because their property was not burned to the ground, their losses are minimal or cosmetic. They are being told odors can be cleaned away, surfaces wiped down, and life restored cheaply and quickly. Yet anyone who has lived through wildfire smoke knows that is often not true. Smoke infiltrates HVAC systems, insulation, fabrics, and wall cavities. Odors linger. Health concerns arise. Buyers walk away. Tenants refuse to return. Market stigma attaches.
The New York case also carries a warning for policyholders and the public adjusters helping them. The insured survived, but not because it handled everything perfectly. The court made clear that destroying records during a dispute is risky. In today’s wildfire claims, documentation is everything. Photos, samples, testing, inventories, and records should be preserved carefully once a claim is underway. Good faith must be supported by good practice.
The larger lesson is that disputes over smoke damage are not science experiments conducted in sterile labs. They are real-world controversies about usability, value, and even trust. Courts and juries understand that. They also understand when insurers overreach by turning disagreement into accusations of fraud.
Los Angeles policyholders facing smoke damage claims should take some comfort in this. The law does not require flames to validate loss. Smoke, even without fire, can still burn livelihoods to the ground.
Thought For The Day
“There is no smoke without fire.”
— Miguel de Cervantes
1 Positive Influence Fashions, Inc. v. Seneca Ins. Co., 2007 NY Slip Op 30083(U) (N.Y. Sup. Ct. Feb. 28, 2007).
2 Positive Influence Fashions, Inc. v. Seneca Ins. Co., 43 A.D.3d 796 (N.Y. App. 2007).
