California Wildfire Fund Faces Potential Exhaustion Amid Eaton Fire Claims
The California wildfire recovery fund is at risk of being depleted by claims stemming from the Eaton fire, with potential losses exceeding its reserves. This financial strain is largely due to ongoing lawsuits filed by families who lost homes in the blaze, with Southern California Edison as the defendant.If utility equipment is steadfast to be the cause of the fire, the state fund would be responsible for any settlements awarded in these legal actions.
In response to this looming financial challenge, the fund’s governing council is exploring strategies to ensure its long-term viability.Documents released ahead of a council meeting reveal discussions about prioritizing wildfire recovery experts over third-party entities like hedge funds adn attorneys. This concern arises as hedge funds are reportedly acquiring insurance industry subrogation rights-the right to pursue an insurance claim-with the aim of profiting from wildfire settlements. Under this arrangement, hedge funds would cover the initial insurance claim but would receive any awarded damages if Southern California Edison is found liable.
The California Earthquake Authority, which manages the fund under the council’s supervision, has also expressed concerns about the impact of attorney fees on the fund’s resources. It is estimated that legal fees could consume up to half of settlement amounts, further diminishing the available funds for wildfire recovery. To mitigate this, the council is considering measures such as paying only “reasonable claims” and urging utility companies to expedite claim settlements, as the fund ultimately bears the financial responsibility for these payouts.
