Claims from the Eaton wildfire might completely deplete a state fund in California designed to cover fire damages caused by utility companies.
The wildfire in Los Angeles in January resulted in 17 deaths and the destruction of over 9,000 structures. The fire is suspected to have been caused by aging equipment belonging to Southern California Edison. If the utility company is found responsible, the financial condition of the fund could be significantly strained, according to documents from the California’s Catastrophe Response Council.
Created in 2019, the state’s $21 billion wildfire fund aims to prevent utility companies from going bankrupt over fire-related costs. The fund is financed by contributions from utility companies and a surcharge on customers’ utility bills.
Insurance claims for both the Eaton fire and the Palisades fire that occurred in January could range from $20 billion to $45 billion, with the Eaton fire alone potentially causing insured losses of up to $15.2 billion. This prompts the fund council to warn that if the Eaton fire was ignited by utility equipment, the resulting claims could fully exhaust the fund.
The losses could surpass the fund’s current amount due to ongoing lawsuits; families who lost homes in the Eaton fire have sued Southern California Edison, and if it’s determined that the blaze was started by utility equipment, the state fund will be responsible for settling those legal actions.
The council is considering strategies to ensure the fund’s financial resilience, including directing most of the funds towards wildfire recovery experts rather than third-party investors and considering scrutinizing the legitimacy of claims.
Additionally, the Earthquake Authority, which administers the fund, has expressed concern that attorney fees could diminish the fund’s resources. They also propose paying only justified claims, and a council member has recommended that utility companies settle claims in a timely manner to avoid reducing the fund.
Source: https://www.theguardian.com/us-news/2025/jul/23/los-angeles-wildfires-insurance-claims
