Observers are questioning the solvency of California's $21 billion Wildfire Fund in the wake of Los Angeles County and two Los Angeles-area cities suing Southern California Edison over infrastructure damage resulting from January’s devastating Eaton Fire.
The county and the cities of Pasadena and Sierra Madre filed similar lawsuits on March 5 in Los Angeles Superior Court, claiming that the wildfire caused extensive damage to public property in the region and that the utility was negligent for failure to maintain or manage equipment that allegedly showed signs of arcing in the area where the blaze ignited.
The county’s losses and damage from the fire total at least hundreds of millions of dollars, according to County Counsel Dawyn Harrison. The county’s legal complaint said it is seeking compensation for damage to recreational areas, roads, parks, mudslide prevention, cleanup efforts, workers compensation claims and other expenses.
“The lawsuit alleges that the Eaton Fire has massively impacted the county’s natural resources, harmed the environment and wildlife, and threatened public health,” a county news release states.
The fire, which burned more than 14,000 acres, destroyed 9,400 buildings, killed 17 people and injured multiple firefighters, has led to the filing of scores of lawsuits by residents that allege SCE’s negligence led to the wildfire’s ignition.
In turn, experts have expressed concern about the solvency of the state’s Wildfire Fund, which provides money to fund eligible claims against utilities that participate in the capitalization of the fund. A bill signed into law in 2019 by Gov. Gavin Newsom established the fund.
“The issue of Wildfire Fund solvency will turn on whether SCE is found to have both caused the fire (still unclear but likely) and its conduct was negligent,” Michael Wara, an attorney and senior research scholar at the Stanford Woods Institute for the Environment, told the Southern California Record in an email. “The most likely scenario – SCE ignition but not negligent – would leave the fund solvent but significantly depleted.”
But if the utility were to be found responsible for igniting the wildfire and for negligent conduct, the Wildfire Fund would probably become depleted due to claims seeking noneconomic damages, according to Wara. That scenario would leave SCE with significant additional losses above and beyond what it would otherwise have to pay, he said.
Another potential risk for the utility involves subrogation claims filed by insurers, according to Wara. If such claims seeking to recoup losses or damage sustained by insureds are for more than 40 cents on the dollar, SCE might have to cover unreimbursed expenses through electricity rate hikes, he said.
The Pasadena lawsuit alleges that the Eaton Fire damaged multiple municipal properties, including the Pasadena Police Department’s Advanced Officer Training Facility, the city’s Municipal Assistance, Solutions and Hiring (MASH) building and water storage tanks.
“Our focus remains on the full restoration of services to Pasadena residents and businesses,” Lisa Derderian, the city’s public information officer, said in a prepared statement. “By working collaboratively with neighboring jurisdictions, we can more effectively address the devastating impacts this fire has had on our communities while ensuring that those responsible are held accountable.”
The county lawsuit alleges that SCE failed to repair and maintain key electrical equipment, failed to maintain vegetation near power lines, as is required by state regulations, and failed to de-energize electrical circuits after the National Weather Service warned of extreme fire risks and high winds prior to the fire.