California E&S Insurance

So, I hate to be a downer, but I think this needs a reality check. The CA wildfire fund is only funded to the tune of about 25 billion. The current collective estimate for damage from all of the fires is over $250 billion and counting. SCE's liability is capped around $3 billion by AB1054 unless they are found to have been grossly negligent. Even if they were found to be fully liable the entire company is only worth around 30 billion if it was dissolved and sold off. The government of CA screwed it's population by bailing out PG&E, and thus the taxpayer is going to be on the hook for all of this. The entire proposed state of California budget has already ballooned from about 300 billion pear year in 2019 to 470 billion per year in 2023. There is zero chance the state can eat a 200+ billion hit. The feds will pay some of it, but the rest is going to have to come from drastically increased taxes state-wide. This is going to create a political battle that both limits funding for recovery, and slows the entire process WAY down as it gets fought out in the legislature and the polls. For many people, the insurance payouts for this will drag out for years, and in most cases will be insufficient to actually rebuild many homes. This is due to a couple things: 1. Statistically, most people are under-insured, so even if things go right, it's not enough to rebuild. 2. Insurance companies are for-profit entities with a mandate to withhold as much money as possible. They have armies of lawyers who will be fighting claims for every single thing they can find. 3. The real-world cost of replacement is going to drastically outpace the projected cost of replacement due to the massive spike in labor and materials prices that's about to occur Remember: It's only "Price gouging" for a merchant to mark up their services unreasonably in response to an emergency, but if the underlying timber, drywall, roofing, concrete, labor, etc. is more expensive because of extreme demand and limited supply there's ZERO that the law can do to help. If you look at the Paradise fire for reference the average cost to rebuild post-fire was 60% higher per square foot. The alone will make rebuilding infeasible for most people. Any lawsuit payouts will come many years from now, and will be much smaller than people think. Refer back to AB1054 and the liability cap that the CA government provided . Even without that cap PG&E only ended up paying 13.5 billion out 16.5 billion in damage for Paradise. They had a worth of 24 billion before the fire and went bankrupt. SCE did somewhere between 10x and 20x as much damage financially, and has a worth of 30 billion. There's just no money there to sue them for. Even without the liability cap it would be like suing the uninsured drunk driver living in their car who ran into you. It's blood from a stone. No assets, no way to collect the judgement. Fire protection improvements to rebuild make perfect sense, but the question is how do you fund them? If the property owners are broke, and the county isn't going to pay for them because Altadena is a tiny minority of the county population, and the state can't pay for them because it's about to be 200+ billion in the hole, and the insurance won't pay for them, and the feds won't pay for them, where does the money come from? The only way I could see it getting done is if Altadena incorporates and passes their own increased property taxes to pay for them. That would be politically unpopular, because folks like being outside of the thumb of a local government, but in the end it would also be unpopular because you'd be cranking up the expenses on the same people who just lost their homes and are unlikely to be able to rebuild. You're right, in that it's probably the only realistic way to protect Altadena and make it insurable, but it's also only feasible to do it by kicking out the current residents and letting the rich move in because they won't care about the slightly increased property taxes compared to manageable insurance costs and a low-restriction location to build mansions in. I hate to be a pessimist, but I think economics is going to eat Altadena's human care and community for lunch.

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