Financial Tug-Of-War Emerges Over California Fire Victims’ Settlement

January 2, 2020 by Daisy Nguyen

A financial tug-of-war is emerging over the $13.5 billion that the nation’s largest utility has agreed to pay to victims of recent California wildfires, as government agencies jockey for more than half the money to cover the costs of their response to the catastrophes.

Pacific Gas & Electric declared bankruptcy nearly a year ago as it faced about $36 billion in claims from people who lost family members, homes and businesses in devastating wildfires in 2017 and 2018. The utility acknowledged its power lines ignited some of the fires.

Those claims were settled as part of the $13.5 billion deal that PG&E reached last month with lawyers representing uninsured and underinsured victims.

Meanwhile, insurers had been threatening to try to recover roughly $20 billion in policyholder claims that they believe they will end up paying for losses from those fires. PG&E settled with the insurers for $11 billion.

PG&E must keep working on its broader bankruptcy exit plan to meet the approval of state regulators and a bankruptcy judge by June, as planned.

In the meantime, the $13.5 billion settlement leaves open just how much would be used to compensate victims, their lawyers and federal and state agencies for the money they spent on rescue and recovery operations.

California state agencies said they’re owed about $3.3 billion, and federal agencies including FEMA filed claims totaling $4.3 billion. The claims are not related to the $1 billion PG&E agreed in June to pay to 14 local governments to cover damages from wildfires caused by its equipment.

U.S. attorneys and the California attorney general’s office raised concerns in separate court filings last month about “potential unequal treatment of claims” and asked U.S. Bankruptcy Judge Dennis Montali to clarify how the money will be divided. They also urged him to ensure that settlement amounts are governed by neutral and experienced trustees.

Lawyers for the fire victims, meanwhile, have asked the judge to reduce the government agencies’ claims and argued in one court filing that the California governor’s office of emergency services can’t recover the costs of carrying out public services such as response to fires.

Many victims dissatisfied with the settlement say giving money to the government agencies leaves little left to people who are still struggling to rebuild their lives.

“There’s not enough money in there for everybody and yet there are too many hands in the pot,” said Sasha Poe, who lost her house in 2018 when a fire killed 85 people and nearly wiped out the city of Paradise.

Some victims said they’re upset that the settlement provides cash and PG&E stock to a trust, stretching out payments over a few years, while insurers will receive their settlement in cash.

“To me, they’re taking care of shareholders first and they want us to wait for payments,” said Lisa Williams, who also lost her house in Paradise. She says a Facebook group she started for wildfire survivors concerned about the settlement has reached 800 members.

“Nobody expects to be made whole by this settlement … but they ought to give the victims cash because they need it more immediately,” she said. “People are still hurting. I know a woman whose house burned down … she’s living in a trailer with an autistic child and the generator and plumbing went out. She has no heat and water and she’s freezing.”

Attorneys for the victims said they hope to work out several key issues, including how the trust for the fire victims will be managed and the process for submitting claims, by the end of January.

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