Real estate expert advises on fire victim’s insurance claim

A real estate expert advises on a case happened in South Dakota involving fire victims who claim their insurer short-changed their property claim. The plaintiffs’ home was damaged by wildfires and wildfire smoke. They assert that the wildfire smoke contained soot, char, formaldehyde and acrolein. The smoke deposited the particulates and gases on the property resulting in a covered loss under the policy which was confirmed by the defendant insurance company’s claims adjuster and partially paid by the defendant. Defendant now claiming that other sources may have caused the formaldehyde and acrolein gases on the property, and that the loss may be excluded under the policies contamination exclusion. The insurer did not pay for complete remediation of the property.

Plaintiffs hired a real estate expert and sued the insurer for breach of contract and bad faith.

Question(s) For Expert Witness

1. Must the plaintiffs disclose the smoke damage in a real estate sale?

2. How will such a disclosure impact the sale?

Expert Witness Response

The plaintiffs will be required to disclose the smoke and fire damage to their property should they ever seek to sell it. I have evaluated the obligation of the plaintiffs to disclose the smoke and fire damage to their property. It is my experience that both circumstances are widely known to licensed real estate brokers and agents, and that the disclosure requirements are also monitored and enforced by lenders and title companies that close such sale transactions.

I have experience in many smoke-damaged homes and have observed what smoke does to the homes, contents and occupants. I have personally interviewed occupants and performed smoke component testing at over 150 homes and buildings affected by the same wildfires in this case. I have found smoke components throughout the county in the numerous properties I have tested. Inhabitants of affected dwellings, particularly individuals who are consistently in the home (as opposed to individuals who spend most of the day elsewhere), complain of a host of health problems.

Property affected by a condition causing physical health issues or electronics failures is damaged and requires remediation before it can be sold without such disclosure. Buyers will view un-remediated homes as damaged. It is well-known in the real estate industry that unfavorable disclosures affect buyers' willingness to pay for property, and reduce value.

I conclude that buyers will regard property subject to serious disclosures involving smoke damage, smoke effects and smoke components discovered through smoke component testing to be just as damaged as properties damaged from other catastrophic events like sewage disasters, and that this will reduce sales value for the seller, here for the plaintiffs.