Sep. 13--PG&E Corp. said Friday it has reached an $11 billion settlement with insurance companies over the 2017 and 2018 wildfires, marking a major step forward in its effort to pull out of bankruptcy.
The tentative settlement covers all of the insurance claims against PG&E, partially reimbursing them for payouts they made to policyholders for the October 2017 wine country fires and last November's Camp Fire.
A bloc of insurers holding about 85 percent of those claims have signed off on the settlement, said company spokeswoman Lynsey Paulo. The $11 billion is considerably more than what PG&E offered the insurers earlier this week -- but still settles those cases for around 50 cents on the dollar, according to the insurers.
The agreement still leaves one major group of wildfire claimants without a deal: thousands of individual victims who were uninsured or underinsured. PG&E earlier this week offered those victims $8.4 billion, a sum that was rejected as inadequate by their lawyers and lobbyists.
If PG&E can strike a deal with the individual victims, it will essentially resolve the mountain of liabilities that drove PG&E into bankruptcy in January. PG&E offered $16.9 billion to settle all wildfire claims --the victims and the insurers combined -- in a reorganization plan filed in Bankruptcy Court on Monday.
That included a maximum of $8.5 billion for the insurers. On Friday, it said it will amend that plan and is working with financial backers to get that funding; it already has commitments of more than $14 billion from investors to settle all claims. Investors welcomed the settlement, driving PG&E's stock price up 82 cents a share, to $10.93, in morning trading on the New York Stock Exchange.
Shareholders had soured on PG&E's stock in recent weeks; the company experienced a setback last week when state lawmakers deferred until January action on PG&E's request for state-backed low-interest financing to help it pay wildfire claims. The bloc of insurance companies, in a prepared statement, said: "While this proposed settlement does not fully satisfy the approximately $20 billion in group members' unsecured claims, we hope that this compromise will pave the way for a plan of reorganization that allows PG&E to fairly compensate all victims and emerge from Chapter 11 by the June 2020 legislative deadline."
Bill Johnson, PG&E's chief executive, said "today's settlement is another step in doing what's right for the communities, business, and individuals affected by the devastating wildfires." The company reaffirmed its commitment to paying a $1 billion settlement, announced earlier, with local governments affected by the fires.
Johnson added that PG&E is working "to resolve the remaining claims of those who've suffered." Cal Fire blamed PG&E for most of the 2017 wine country fires and the Camp Fire. The Camp Fire, the deadliest in California history, destroyed more than 10,000 homes in Paradise and surrounding communities.
PG&E is scrambling to secure approval for its bankruptcy reorganization plan. Under a deadline set by the Legislature, it must have a deal to exit bankruptcy by June 30 to be eligible to participate in a wildfire insurance fund established by the state earlier this year. The fund will pay claim and limit liabilities for the major California utilities for damages resulting from future wildfires.
The company is also trying to fend off a hostile takeover attempt by a group of hedge funds that hold PG&E bonds and are owed billions of dollars. The bondholders have proposed a rival plan in which they'd pay wildfire claims and take control of as much as 95 percent of PG&E's stock at a steep discount. Insurers' losses on wildfires have created a crisis in the Sierra foothills and other fire-prone regions.
Insurance companies have spent about $24 billion paying wildfire claims in California the past two years, prompting them to impose stiff rate increases and pull out of some of the state's most fire-prone regions. Insurers dropped more than 340,000 rural homeowners in four years, according to figures recently by the Department of Insurance.
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