Several major insurance companies, including Allstate, State Farm, USAA and their subsidiaries, have filed lawsuits against energy supplier Pacific Gas & Electric Co. (PG&E) over damages related to the Camp Wildfire that devastated California’s Butte County in November.
PG&E power lines have come under scrutiny as a potential cause for wildfire, which became the deadliest and most destructive wildfire in California’s history after burning through 153,336 acres, destroying 18,793 structures, and killing 86 people.
If it is determined that PG&E equipment was the cause of the fire, under California law the company will assume full financial liability for all damages and may face potential bankruptcy.
Estimates from catastrophe modeller RMS suggest that re/insured losses resulting from the Camp Wildfire could be between $7.5 billion and $10 billion, while AIR Worldwide put industry losses at between $6 billion and $9 billion.
The recent series of lawsuits come on top of earlier cases filed by victims of the Camp Fire, who argued that PG&E should face criminal charges if investigators determine that reckless operation or maintenance of power equipment caused the fire.
Insurers noted in their lawsuits that flames ignited near the site of a transmission-line irregularity reported by the utility, with a potential second ignition point also involving PG&E distribution lines.
If PG&E is found liable for the wildfire damage, it will alleviate losses for some re/insurers, but many companies will continue to face exposure via PG&E’s approximately $1.4 billion re/insurance program, which includes its $200 million Cal Phoenix Re Ltd. (Series 2018-1) catastrophe bond.
A.M. Best also suggested that many re/insurers have additional avenues of exposure to PG&E’s volatility due to the fact that the industry holds between roughly one fifth to one quarter of the company’s debt, or about $4.1 billion.
California lawmakers refused to change the legal standard or reduce PG&E’s liability following a similar series of deadly fires in 2017 in Northern California, although they allowed to the company to pass on costs to its customers in order to spare it from bankruptcy.
“We are aware of lawsuits regarding the Camp Fire,” Lynsey Paulo, a PG&E spokeswoman, said in a recent statement. “Our focus continues to be on assessing infrastructure to further enhance safety and helping our customers recover and rebuild.”
The new lawsuits were filed last month in Sacramento County Superior Court and were first reported by the Sacramento Business Journal.
