(Bloomberg) -- Almost a year after California’s deadliest wildfire was finally snubbed out, what’s left of the mountain town of Paradise is mostly empty housing lots, burned-out cars and skeletons of storefronts. Residents have scattered. Some are living with relatives, in cheap motels nearby, or, authorities say, in camping tents and cars.
Meanwhile, inside a San Francisco courtroom $1,600-an-hour lawyers, representing everyone from bond and equity holders to a billionaire investor, joust over control of PG&E Corp., the utility that went bankrupt after its equipment sparked the blaze that killed 86 people. Each day of the reorganization racks up about $1 million in fees and related expenses for lawyers, bankers and restructuring experts.
The stark contrast has frustrated many of the victims, who say PG&E has brushed aside their concerns while offering insufficient payouts, despite the utility’s vow to compensate them. And now they face a deadline of 5 p.m. Monday to file claims for injuries and property damage—far less time than normally granted outside of bankruptcy, say their lawyers, who’ve asked for an extension.
“I keep hearing PG&E say they will make it right,” says Karen Gowins, 71, who lost her 3,000-square-foot Paradise home in the Camp fire and now lives in two trailers with her husband, Rich, and son, Adrian. “I don’t have high hopes for that. They would rather pay for legal fees and litigation than pay wildfire claims.”
The dispute is another sign of how complex and fraught PG&E’s bankruptcy reorganization—one that could determine the future of power delivery in the most populous state in the U.S.—has become. The utility filed for bankruptcy in January in the face of an estimated $30 billion of liabilities tied to more than a dozen wildfires.
As the parties duke it out over who will eventually run PG&E, it’s even led to a seemingly odd-bedfellows coalition: Many of the fire victims have thrown their support behind a group of PG&E creditors led by bond giant Pacific Investment Management Co. and activist investor Paul Singer and his Elliott Management Corp. hedge fund.
The reason: PG&E has set aside $8.4 billion for payouts to individual victims while Elliott Management has offered $13.5 billion in a rival reorganization proposal that would virtually wipe out the existing shareholders.
“PG&E remains focused on doing right by the customers and communities we serve,” spokesman James Noonan said in a statement. “PG&E believes the Chapter 11 process will support the orderly, fair and expeditious resolution of claims, including wildfire claims.”
Victim lawyers say they expect half or less of the approximately 100,000 eligible claims to be submitted by the deadline. Many people either think there won’t be enough money for them to be compensated or, having been displaced, lack the wherewithal to file, said the attorneys, who want the due date pushed back to Jan. 31.
Frank Pitre, a lawyer for fire victims, said that under the normal statute of limitations, a person would have two years to file a claim for injury or death and three years for property damage. It’s not unusual, however, for claims within bankruptcy to have a shorter time limit as a way to speed up the process.
PG&E is trying to emerge from bankruptcy by June 30. The company has estimated it would spend as much as $22 million notifying potential victims about the deadline with 6.2 million mailings, emails and advertisements. The utility has also supplied $105 million for a fund that helps victims cover living expenses and other emergency needs.
“Our court-approved claims notification process is broad and thorough—above and far beyond what is typical in a Chapter 11 process,” Noonan said.
That’s been of little solace to many of the victims.
“We feel as though our lives have been erased,” said George Bell, 68, whose Paradise home was badly burned by the Camp Fire. ”It was and continues to be a horrifying, devastating life-changing event.”
After driving separately through flames in a harrowing escape, George and his wife, Debora, first took shelter in their daughter’s apartment and then moved to a “flea-bag” hotel in Redding. Since then, they’ve moved to a series of hotel rooms and are now located at Residence Inn in Roseville. What’s worse: Bell gave 36 years of his life to PG&E as an electrical technician.
He said his insurance company went bankrupt shortly after the fire and the state took over his coverage. That meant his $1.2 million in insurance coverage was cut to less than half, he said. The couple has filed a claim against PG&E to cover the difference.
“I think we are going to get a raw deal,” Bell said. “I think they are going to try to weasel out of their obligations. It’s now up to the bankruptcy judge.”
Earl Cummings, 47, said he’s optimistic that PG&E will compensate him for his emotional distress and lost possessions including a 1970 Chevrolet Blazer he was restoring. “I can’t see how they wouldn’t, given all the damage and destruction they caused,” said Cummings, a painter who is living in a government-provided trailer in a parking lot in Paradise.
Karen Gowins’s trailers are parked on a friend’s wooded lot in Magalia, an unincorporated town next to Paradise in the Sierra foothills. The family was split up as the Camp fire raged through the town. Her son walked through flames to escape with two of the family’s Labrador retrievers. One died in the fire.
“We lost everything,” said Karen, who is a member of the official committee of wildfire victims.
The $315,000 insurance payment the family received for the loss of their three-story home will only cover a fraction of the estimated $1.5 million it will cost to rebuild, she said.
Still, the retired accountant considers her family among the “lucky ones,” having survived the fire, a “roof over our heads” and their dogs.
“A lot of our people,” she added, “aren’t over the emotional trauma yet.”
(Adds details on a wildfire fund in 11th paragraph)
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