PG & E reaches $ 11 billion settlement with insurers following deadly forest fires

This is killing forest fires the only large group of claimants who have not made a settlement with San Francisco's public service, pushing them out of bankruptcy next year.

The settlement is the second major agreement between PG & E and the applicants. In June, PG & E agreed to donate $ 1 billion to local governments and state agencies to settle fire claims in 2017 and 2018, with support for the company's bankruptcy plan.

Representatives of the victims of the fires criticized the deal on Friday, saying the company seemed to want to isolate those who lost their homes and lives as a result of the fires.

"PG & E pulls money from the pockets of people whose homes and businesses it has burned down and hands over money to insurance companies to buy their cooperation," said Cecily Dumas, one of the leading lawyers representing fire victims during bankruptcy. "This regulation violates the rights of victims under California law to be compensated first. The regulation shows that PG & E puts the needs of victims last. "

The settlement has been negotiated with carriers who hold approximately 85% of subrogation claims in the form of insurance against the company, which allows insurance companies to sue the alleged wrongdoers.

A spokesperson for PG & E said that she expected the agreement to cover all insurance claims. PG & E added that it was continuing its efforts to resolve claims with individual claimants.

PG & E has been negotiating for some time with insurance companies that own fire damage claims, including affiliates of Farmers Insurance Exchange and Hartford Accident & Indemnity Co., and Baupost Group LLC, a fund hedge that bought for over $ 2.5 billion. insurance claims.

"We hope this compromise will pave the way for a reorganization plan allowing PG & E to equitably compensate all victims," ​​said a spokesman for the insurance group in a statement.

PG & E, which provides gas and electricity services to 16 million people, filed for bankruptcy protection earlier this year, citing $ 30 billion in debt from a series of fires murderers and destroyers triggered by his equipment.

Since then, he has begun inspecting and repairing thousands of kilometers of cable to reduce the risk of forest fires and to engage in complex negotiations with lawmakers, plaintiffs, bondholders and California shareholders. , in order to restore the business financial foundation.

PG & E faces a deadline of June 30, 2020 to exit the bankruptcy if it wishes to participate in a fund put in place by California to help utilities pay for fire damage, which increases as the state's attack on the consequences of drought and climate change. .

In recent months, the company has been battling insurers and forest fire victims about the amount it should spend on fire damage coverage. The settlement with the insurers will ultimately include a support contract requiring the insurers to favor the plan to exit the bankruptcy of PG & E, according to a person familiar with the matter.

Final documents must still be prepared on the insurance regulations.

Fire investigators in California discovered that PG & E equipment had triggered numerous fires in the state in 2017 and 2018, including the campfire last November, which claimed the lives of 86 people and destroyed the city. Paradise. State investigators concluded that the company had not caused the most destructive fire in 2017, the Tubbs fire.

The lawyers representing the fire victims strongly disagree with this conclusion and PG & E's culpability in the Tubbs fire is now settled for a trial in court, which creates significant uncertainty about the company's total liability.

Settlement with insurers, which involves both

PG & E
Corp.

PCG 10.69%

and its Pacific Gas and Electric Co. utility are subject to the approval of the bankruptcy court to oversee the PG & E Chapter 11 plan.

On Monday, PG & E unveiled a $ 18 billion plan to resolve all forest fire claims and come out of bankruptcy next year, with the goal of preventing creditors from taking control of the company in difficulty.

This plan has disappointed the representatives of the fire victims, who have declared in court that they owe them $ 54 billion. The ultimate amount that PG & E has to pay could be considerably higher.

With agreements in principle with insurance companies and local governments, PG & E has already reached agreements for a combined $ 12 billion to settle claims, excluding fire victims .

The company said it still plans to raise $ 14 billion in additional capital to pay the claims, according to documents filed with the US Bankruptcy Court in San Francisco. PG & E said it has received commitments of $ 1.5 billion and is looking for the remaining equity funding commitments in the coming weeks.

-Dave Sebastian contributed to this article.

Corrections & Amplifications
PG & E has announced that it has entered into an agreement with 85% of insurance subrogation claimants to settle all of these claims related to the 2017 Northern California Wildfires and the 2018 campfires. the previous article incorrectly stated that the company had agreed to resolve the majority of claims. (September 13, 2019)

Write to Peg Brickley at [email protected] and Russell Gold at [email protected]