Allstate Pulls Out of Legal Claim Over Santa Barbara Fire

Stung by criticism, Allstate Insurance announced it has withdrawn from a $120-million legal claim by a group of insurance companies against government agencies and, potentially, private landowners in connection with last year’s devastating Santa Barbara fire.

“It was a PR nightmare,” said Allstate corporate relations manager Carlos Aurellano. “We felt that what we may have recovered financially was not worth the public ill-will.”

The firms recently filed notice of their intent to sue county, state and federal agencies, charging they contributed to the fire--which destroyed more than 500 homes--by failing to trim weeds and chaparral. Allstate officials and their attorneys had indicated that the suit might also be filed against 50 of the property owners who were insured by firms not part of the 11-member insurance company coalition.

In taking the action, the firms drew criticism from residents, government officials and local media.

State Insurance Commissioner John Garamendi, calling the idea of suing private landowners “strange,” had said he would study the situation.

“The original decision to pursue the lawsuit was strictly a financial issue,” Mike Haskell, Allstate regional vice president, said in a written statement. “But after reviewing the situation, we found the matter growing beyond our intentions.”

Allstate, which has paid $39 million in claims from the June, 1990, blaze, was by far the largest of the potential litigants. Four of the smaller ones, Southern California Auto Club, Cal Casualty, SAFECO and USAA, also have dropped out, an attorney said.

“A long, drawn-out lawsuit would be costly to pursue, and the economics don’t make sense for the amount which might be recovered,” said a statement from the Auto Club, which paid less than $1 million in claims from the blaze. “(And) we always want to be sensitive to the community, of which we are a part, by not pursuing litigation unnecessarily for this purpose.”

The six companies still proceeding with the claim are Farmers, Cal Insurance Group, Crum & Forster, Great American, Prudential and Sequoia, coalition attorney Stephen Cole said.

John Millen, director of media relations for Farmers, emphasized that the firm, which paid $24 million in claims, would not file suit against any private landowners. Millen added that it would be remiss not to demand money on behalf of Farmers policyholders from government agencies which, he charged, “played a significant role (in the fire) by not maintaining proper brush management programs.”