The Butte fire has destroyed more than 500 homes in Calaveras and Amador counties. According to a recent lawsuit, the fire may have been started by a Pacific Gas & Electric Co. power line coming into contact with a tree. This gives rise to the prospect that PG&E could haveliability for damages caused by the Butte fire. However, the fire damages are also likely covered, at least in part, under homeowners’ insurance policies. When a wildfire like the Butte fire, or any event that causes loss, occurs because of the fault of a third party, and the loss is also covered by insurance, questions often arise regarding the interplay between obtaining policy benefits from your insurer, and damages from the responsible third party.
It is entirely proper to present an insurance claim for damages from the Butte fire, obtain available insurance policy benefits, and also sue the responsible third-party, which in this case may be PG&E. There are many items of damage people can suffer from a wildfire that are not covered by insurance. For instance, shrubs, trees, and vegetation are often subject to a low sub-limit in insurance policies. However, under California law, a third-party tortfeasor who injures someone’s “timber, trees, or underwood” is responsible for three times the full value of the trees and vegetation. (California Civil Code §3346.) In addition, many homes are often underinsured, and a homeowner cannot collect beyond the limits of the insurance policy. However, there is no limit on the liability of a third-party like PG&E for the damages its conduct causes. Further, people can recover for emotional distress against a responsible third-party, but do not get policy benefits for emotional distress. In addition, PG&E, because it operates a utility line, may be liable for inverse condemnation, which provides for attorney’s fees that would not be available an insurance policy.
A third-party like PG&E is not entitled to deduct the amount you were paid by your insurance company from its liability for the damages they caused. This is known as the collateral source rule, and provides that where a person who suffers a loss receives “some compensation for his injuries from a source wholly independent of the tortfeasor” then the amount received is “not be deducted from the damages” the third-party wrongdoer owes. (Hrnjak v. Graymar, Inc. (1971) 4 Cal.3d 725, 729.) However, practically speaking, your insurance company has a right of “subrogation” for the amount they paid for the loss against the culpable third-party, which in this case allegedly is PG&E. (21st Century Ins. Co. v. Superior Court (2009) 47 Cal.4th 511, 518.) Thus, in all likelihood, an insured can only obtain from the responsible third-party damages above and beyond what the person received from their insurance company.
In a wildfire, homeowners often suffer significant losses which are often not fully recoverable under insurance, but are obtainable in a suit against the entity responsible for causing the fire. Persons who have suffered damage as a result of the Butte fire have every right to make an insurance claim, and seek recovery from any culpable third parties responsible for starting the fire.