Calif. fire survivors fear payouts will shrink

PG&E bankruptcy filing a complicating factor

Lori Kennedy thought she was going to live a comfortable retirement in a modest home in wooded Magalia, California.

But she woke up a year ago to a phone call and hurried evacuation orders, and in a matter of hours nearly every trace of her life was incinerated: the Christmas ornaments her children made when they were little, the sculptures and artwork she spent her career creating, the home where she hosted family gatherings for more than two decades.

“It’s not just that you’ve lost things. You’ve lost validation of your existence for all those years,” Kennedy said. “You can replace furniture. But you can’t replace baby books, wedding albums.”

Kennedy is one of thousands of survivors of the Camp Fire, the deadliest wildfire in California history, which was sparked by Pacific Gas & Electric equipment in November 2018 and killed 85 people and nearly incinerated the town of Paradise. More than 70,000 people have filed claims against the utility over various wildfires in recent years.

Attorneys believe as many as 100,000 people are eligible to receive payments for damages they suffered during the devastating wildfires of recent years.

But wildfire victims of previous years must wait for PG&E to exit bankruptcy to get any payout from the utility. And as the 2019 wildfire season takes another toll on Northern California and the utility’s equipment is blamed for new fires, the number of homes destroyed ticks up. More victims are filing claims against the company, potentially reducing the payout all victims and creditors could receive.

“The more victims there are, the smaller the slices of the pie. That’s just the way it’s going to be,” said Hugh Ray, a bankruptcy attorney and principal at the law firm McKool Smith.

Recovery has been particularly hard for Camp Fire survivors because many in their safety nets also lost everything.

In its bankruptcy plan, PG&E has pledged to pay $8.4 billion to wildfire victims and an additional $11 billion to compensate insurance companies for their payouts. A competing proposal made by bondholders seeking to gain control of PG&E would pay wildfire victims $13.5 billion.

It’s unclear how much the total liabilities for wildfire victims will amount to, and the matter is being litigated. Attorneys for wildfire victims hope for a full recovery, but some bankruptcy experts are skeptical.

“They’re not going to get anything like a complete recovery,” Ray said. “It won’t be anything like enough to solve all the problems. At this point, I don’t see the money.”

Complicating matters, debts that PG&E incurred after the company filed for bankruptcy protection are supposed to be treated as a higher priority than those incurred before bankruptcy, experts said.

Without bankruptcy law that enables companies to continue operating after filing, no one would be willing to lend to the company or provide equipment, for fear of not getting paid.

That means victims of blazes such as the one last month in Sonoma County that destroyed 374 structures and forced 200,000 people to evacuate are supposed to be paid before victims of earlier fires.

The Associated Press file The wreckage of a Magalia, Calif., home shows the destructiveness of the Camp Fire. Recent wildfires have scorched communities in California, leaving a new group of victims filing claims against a utility that has filed for bankruptcy protection.