Homeowners living in Paradise, Calif., are just now returning home after a devastating wildfire caused up to $10 billion in damage, according to RMS estimates. The Woolsey Fire, which overlapped the Camp Fire, has a damage price tag of about $3 billion.
While the cause of the Woolsey Fire is still under investigation, according to an update issued by Los Angeles County Fire Department, the Camp Fire is being blamed on high-voltage transmission electrical lines that malfunctioned.
The state also experienced wildfires in July of 2018 that generated $845 million in insured losses, according to Fitch Ratings.
Pacific Gas & Electric (PG&E) has been under a great deal of scrutiny and faces liability for multiple wildfires in Northern California’s wine country last year.
“There will be different cause and origin examinations for each fire, even if they contribute to the same wildfire,” said Marc Ladd, an insurance litigator at the trial firm McKool Smith. “And then there will be a cause and origin examination and a claim response for each fire.”
As for the sheer costs to victims, he doesn’t expect PG&E will go bankrupt. Last year, the state discussed a bailout to assist the utility with wildfire damage costs.
“The lawmakers in California have already come out to say that’s not in anyone’s best interests. I think there will be some financial compensation by the state for PG&E,” said Ladd. “I don’t think you can ever be adequately insured for this.”
According to a Bloomberg article by Will Wade and Katherine Chiglinsk published last month, the utility has about $1.4 billion in insurance coverage, a significant amount of insurance for a utility to have, said Ladd.
Lawsuits arising from the wildfires are expected, he added.
“I think they will be consolidated for this year’s wildfires and I think there will be some kind of arrangement for paying homeowners first and then seeking costs against PG&E by the insurance companies,” Ladd said.
PG&E’s insurers could deny coverage for losses associated with the wildfires. Ladd explained some reasons for denials could include a lack of fortuity – if PG&E knew about certain outages ahead of time and didn’t report that to insurers – and the possibility of gross negligence, if repairs were known to be necessary but not completed.
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