Farley's Forest Products, Inc. v. RSUI Indemnity Company et al

In this insurance coverage dispute, Farley's Forest Products, a timber and lumber company, suffered devastating property losses and business interruption due to a massive wildfire in the western United States in 2024. The company filed a claim under its commercial property insurance policy issued by RSUI Indemnity Company and other insurers. The insurers denied coverage, citing policy exclusions related to smoke, ash, or environmental contamination. Farley's sued for breach of contract and bad faith denial, arguing that the direct physical loss from the fire was covered and that the exclusions were inapplicable. The case proceeded to the U.S. District Court. The court reviewed the policy language and examined the cause of loss. The dispute centered on whether the damage was primarily caused by a covered peril (fire) or excluded perils. The judgment clarified the interpretation of contamination exclusions in wildfire-related claims.

The court ruled in favor of Farley's Forest Products, holding that the wildfire damage constituted a direct physical loss covered under the policy and that the ambiguous pollution exclusion did not unambiguously apply to wildfire smoke and ash. RSUI was ordered to pay the claim. No bad faith damages were awarded.

Whether the insurance policy's contamination or pollution exclusions barred coverage for property damage and business interruption losses directly resulting from a wildfire.

The decision provided important precedent for policyholders in wildfire-prone regions, limiting insurers' ability to invoke broad pollution exclusions to deny fire-related claims. It prompted insurers to clarify policy language and reaffirmed the duty of good faith in claim handling.