The wine country wildfires of October 2017 are expected to have caused greater losses than any other in U.S. history.  AON Benfield predicts that on an aggregated basis, “this is costliest insured wildfire event ever recorded.”  Back on October 31, 2017, California Insurance Commissioner Dave Jones revealed that the then total for claims filed relating to these wildfires exceeded $3 billion and that he expected this total to climb higher.

Based on the numbers Commissioner Jones released on October 31, which were based upon claims loss data reported by 15 major insurers in the state, nearly 95% of the losses were for residential property.  Losses related to commercial lines will eventually take up a larger share of official losses as it takes considerably more time to calculate business interruption losses (this can take months, sometimes years).


Although Commissioner Jones has not yet released revised numbers, various disaster modeling firms have continued to update their predictions.  Last month, AIR Worldwide estimated covered damages from the wildfires to be in the range of $2 to $3 billion.  AIR Worldwide’s loss estimates represent expected residential, automobile, and commercial direct and business interruption losses.  On November 16, AIR Worldwide released an updated loss estimate with a range $8 to $10.5 billion.  According to AIR Worldwide, its new damage estimate is based on “analyzing findings from its damage survey conducted during the week of October 30, along with newly acquired information about policy terms, and a re-examination of the replacement values of high-value homes.”

Also on November 16, Fitch Ratings, which is provides credit ratings and research, released an assessment that “no US (re)insurance companies in [its] rated universe are expected to be downgraded as a result of losses from the California wildfires alone.”  This assessment, however, was tempered by the caveat that “[a]dding the California wildfires to hurricanes Harvey, Irma and Maria will make 2017 one of the costliest catastrophe loss years in U.S. history,” as insured losses for the year are estimated at $70 to $100 billion.  “In some instances, insurers could ultimately report aggregate 2017 catastrophe losses at levels that strain capital and pressure ratings.”

Ultimately, Fitch Ratings predicts that the majority of insured losses relating to the wine country wildfires will fall upon primary insurers, and thus “the losses ceded to the reinsurance market will likely be considerably less than the portion ceded from recent hurricane events.”  Nevertheless, several insurers already made public statements that their losses from these wildfires will exceed $500 million, including Allstate, Travelers, AIG, and CSAA.


Back in October Commissioner Jones, declared an emergency situation in California, permitting carriers to use out-of-state adjusters to meet the high volume of claims resulting from the wine country wildfires.

More recently, however, Commissioner Jones has issued multiple notices and reminders to carriers that their adjusters, even the out-of-state ones, must be properly trained to process claims according to California law after his office received complaints that some adjusters were making representations that conflict with California law.  The Commissioner provided the following examples of incorrect representations that had been brought to his agency’s attention:

  • “Incorrect time frame provided to collect full replacement cost to rebuild.  Policyholders were told they have between 6 and 12 months.  In a state of emergency, as these fires were, policyholders have no less than 24 months under California law.”
  • “Advised that if they decide not to rebuild in the same location, the policyholder could not receive full replacement benefits.  Instead, California law provides policyholders may choose to rebuild in the same location, a new location or purchase an already built home in another location.”
  • “Told additional living expense benefit would expire in 12 months.  Under California law, in a state of emergency, policyholders have up to 24 months.”


Although the California Public Utilities Commission, CALFIRE, and other organizations are still in the process of determining the cause(s) of the wine country wildfires, litigants have already filed at least 15 lawsuits against utility giant PG&E.  This is no surprise as PG&E and other utilities companies, such as SDG&E, have already been making payouts for losses related to past wildfires.  In a recent filing, however, PG&E stated that at least one of the wine country wildfires might have been  caused “by electrical equipment that was owned, installed and maintained by a third party.”

If PG&E or another deep-pocketed entity is determined to be liable for the wine country wildfires, they can expect to face numerous additional lawsuits from carriers, local agencies, CALFIRE, and individuals, all of whom will be looking to get a piece of the liability pie.

In recent times, utility companies have tried to shift catastrophic liability costs that are not covered by their insurance policies onto their rate payers.  In response to this practice, California legislators recently announced they will introduce legislation in January 2018 to prevent utilities companies that are found liable for wildfire damages from passing their costs for claims that are not covered by insurance policies onto their rate payers.

Regardless of whether this proposed legislation goes into effect, PG&E’s liability insurance for any potential losses related to these wildfires is for less than a $1 billion.  Considering that recent insured loss estimates, as mentioned above, are at least $8 billion, I think we can expect PG&E to fight tooth and nail to avoid being held culpable for the “costliest insured wildfire event ever recorded.”