An insurance claim does not always move in a straight line.
An insurer may initially deny a claim, reopen it after receiving additional information, tell the insured that the loss appears to be covered, and later deny coverage again after further investigation.
If the insured relied on what the insurance company said, can the insurer still rely on exclusions in the policy?
A recently published California Court of Appeal decision addresses that problem. In Linsao v. First American Property & Casualty Insurance Co. (2026), the homeowners argued that their insurer should be prevented from denying coverage because its representatives had told them that the loss was covered.
The Court of Appeal affirmed summary judgment for the insurer.
The decision is useful for policyholders and businesses because it draws a significant distinction between what an insurer says while handling a claim and what the insurance policy actually covers.
The Property Damage and the Insurance Claim
The dispute arose from damage to a home in Los Angeles County.
According to the court’s opinion, construction activity on neighboring property affected drainage and runoff. Water, mud, and debris entered the insured property and caused damage.
The homeowners submitted a claim to First American Property & Casualty Insurance Company. First American initially denied the claim. The homeowners challenged that decision, and the insurer reopened its investigation.
The record included evidence that, during the reopened investigation, representatives of First American told the homeowners that the loss was covered. The homeowners asserted that they relied on those representations.
First American later denied the claim again, relying on exclusions in the policy. The homeowners sued.
Can an Insurer Be Bound by What Its Representatives Said?
The homeowners argued that First American should be estopped from denying coverage because its representatives had represented that the claim was covered and the homeowners relied on those statements.
The Court of Appeal recognized evidence that could create a factual dispute about whether those representations were made and whether the homeowners relied on them.
But that did not resolve the coverage question.
California law generally does not permit estoppel to create insurance coverage for a risk that the policy itself excludes. That principle was decisive.
In other words, a representation by an insurer or adjuster can matter, but it does not necessarily rewrite the insurance contract.
What Does the Policy Actually Cover?
The court separately analyzed the language of the policy and the exclusions relied upon by First American.
An insured may have evidence that an adjuster said a claim would be covered. There may even be evidence that the insured acted in reliance on that statement. But if the loss falls within an enforceable exclusion, California’s rules concerning waiver and estoppel may prevent the insured from using the adjuster’s statement to create coverage that the contract did not provide.
This can produce a result that feels counterintuitive to a policyholder.
From the insured’s perspective, the insurance company may have investigated the claim, changed its position, communicated that coverage existed, and caused the insured to proceed on that understanding.
The legal analysis may still return to the written policy.
That is one reason coverage disputes often turn on the exact language of the policy rather than the parties’ general understanding of what the insurance was supposed to protect against.
An Insurance Company’s Statements Can Still Matter
Linsao should not be read to mean that statements by an insurer are irrelevant.
The effect of an insurer’s conduct depends on the particular facts and the legal theory being asserted. Communications during claim handling may be relevant to issues involving reliance, claim handling, waiver, estoppel, or alleged bad faith. They may also affect factual disputes about what occurred during the adjustment of the claim.
But there is an important limit.
California courts have long distinguished between preventing an insurer from relying on certain rights and using estoppel to expand the basic scope of insurance coverage.
If the policy never covered the particular risk, an insured generally cannot use estoppel to create that coverage.
That is different from a dispute in which coverage already exists and the insurer is attempting to rely on a condition, procedural requirement, or other defense that may have been waived.
For Policyholders, Written Communications Matter
The facts in Linsao also show why communications with an insurer should be documented carefully.
When an adjuster or insurance representative makes a significant statement about coverage, the insured may want to confirm that communication in writing.
That does not guarantee coverage. It does create a clearer record of what was represented, when it was represented, and what the insured did in response.
Policyholders should also be cautious about treating a preliminary statement from an adjuster as the final coverage determination. Insurance investigations can continue, and an insurer may later identify exclusions or other policy provisions that change its position.
For Businesses, the Stakes Can Be Larger
Although Linsao involved homeowners insurance, the same practical issue can arise with commercial insurance.
A business may suffer a substantial property loss, interruption of operations, third party claim, or other event and begin making financial decisions based on communications from its carrier.
The business may hire contractors, continue operations, negotiate with third parties, preserve or dispose of damaged property, or make settlement decisions while the insurer is investigating coverage.
If the carrier later changes its position, the consequences can be significant.
Businesses facing a substantial claim should therefore consider the actual policy language alongside communications from the insurer. Coverage letters, reservation of rights letters, emails from adjusters, investigation requests, and formal denial letters can all become important parts of the record.
What Linsao Decided
The Court of Appeal did not hold that an insurance company is free to say anything it wants during a claim investigation without consequence.
Its holding was narrower.
The court concluded that the homeowners could not use estoppel to create coverage for a loss excluded by the insurance policy. Even assuming there was evidence that representatives of First American said the loss was covered and that the homeowners relied on those statements, those facts could not expand the policy to cover an excluded risk.
The court therefore affirmed summary judgment for First American.
For policyholders, the case illustrates a difficult reality of insurance disputes. What the insurer says can matter, but the starting point remains the contract.
When a substantial claim is disputed, the most important question may not be whether someone at the insurance company once said the claim was covered. It may be whether the policy, read as a whole, actually provides coverage for the loss.
Legal Authorities
- Linsao v. First American Property & Casualty Ins. Co. (Cal. Ct. App., 2d Dist., Div. 1) No. B340746, filed Aug. 27, 2026; certified for publication Sept. 23, 2026 — official opinion
Related practice areas: Contracts and Business Torts · Civil Litigation