PG&E and Insurance Companies Announce $11 Billion Deal to Settle Wildfire Claims

Four days after filing their bankruptcy reorganization plan, PG&E said Friday (9/13) that the company had reached an agreement to settle wildfire claims against the utility for $11 billion, far below the $20 billion the insurers had originally sought in bankruptcy court.

Four days after filing their bankruptcy reorganization plan, PG&E said Friday (9/13) that the company had reached an agreement to settle wildfire claims against the utility for $11 billion, far below the $20 billion the insurers had originally sought in bankruptcy court.

The announced settlement is between PG&E and a group of insurers known as the ad hoc subrogation group that has been formally recognized in bankruptcy court as one of the company’s major creditors. The group holds 85% of uninsured insurance claims from the 2017 and 2018 fires, which destroyed more than 20,000 homes and killed 130 people.

In a statement to the press, PG&E CEO Bill Johnson said:

“Today’s settlement is another step in doing what’s right for the communities, businesses and individuals affected by the devastating wildfires. As we work to resolve the remaining claims of those who’ve suffered, we are also focused on safely and reliably delivering energy to our customers, improving our systems and infrastructure, and continuing to support California’s clean energy goals. We are committed to becoming the utility our customers deserve.”

The settlement, however, does not cover individual wildfire victims who have sued PG&E.

Wildfire victims’ attorney Amanda Riddle was highly critical of the settlement, which she said came as a surprise:

“They are putting the needs of victims to the bottom – it is their last priority and that speaks volumes.”

The settlement is subject to final approval by U.S. Bankruptcy Judge Dennis Montali, is much less than the $20 billion in claims filed by members of the ad hoc subrogation group.

The $11 billion settlement figure is substantially more than what the company proposed in a reorganization plan filed with the bankruptcy court just four days ago. Under that plan, the company proposed paying insurance companies $8.5 billion. In its Friday statement, PG&E said it will secure additional equity financing to cover the higher settlement amount.

The company has yet to come to terms with the tens of thousands of individual wildfire victims who have sued PG&E in the wake of fires that ravaged communities across Northern California in October 2017 and November 2018.

Plaintiffs’ attorney Riddle said there could be as many as 50,000 victims who file claims through the bankruptcy court by the October 21, 2019, deadline.

Riddle estimated that those victims should be entitled to as much as $30 billion to $33 billion based on past PG&E settlements with individual plaintiffs, which she said have run about three times the amount paid to insurance companies.

The wildfire plaintiffs are also formally recognized in bankruptcy court as a PG&E creditor, and their attorneys continue to negotiate a settlement with the company.

Even with all the uncertainties surrounding the individual victims’ cases, the proposed deal with insurers represents one major box that PG&E needed to check off as it works to exit bankruptcy.