Fire Insurance Payouts Could Reach $3 Billion

State government and insurance industry sources said Monday that insurance payouts from the Southern California wildfires could hit $3 billion and that more claims are being filed than originally predicted.

This would make the October wildfires the costliest conflagration since 1906, when a great fire that followed the massive earthquake in San Francisco caused $5.7 billion in damage, in inflation-adjusted dollars.

Norman Williams, a spokesman for state Insurance Commissioner John Garamendi, said that 12,769 claims have been filed so far in the recent wildfires and that the total policy limit under those claims is $3.45 billion.

But not every claim may entitle a policyholder to the maximum benefit. The Personal Insurance Federation, a leading industry lobbyist in Sacramento, is estimating that total payouts will range from $2.5 billion to $3 billion, according to Jerry Davies, a spokesman for the group.

As the blazes were brought under control, the industry expected to process, at most, about 10,000 fire-related claims.

On Monday, the Insurance Services Office, a leading industry statistician, said it expects more than 19,000 claims. The claims are for many losses in addition to the 3,500 homes believed destroyed, such as damage to homes, automobiles and personal property.

Insurance payouts do not cover everything in such disasters. There are deductibles that must be paid by policyholders. After previous disasters, the government has often bridged much of the gap between total losses and insured losses with loans or grants.

According to Garamendi’s office, claims filed had maximum limits totaling $1.39 billion in San Diego County, $1.35 billion in San Bernardino County, $156 million in Ventura County, $84 million in Los Angeles County, $13 million in Riverside County, and $443 million in overlapping county boundary areas where a specific county-by-county breakdown was not yet available.

Neither the Federal Emergency Management Agency nor the state Office of Emergency Services was willing to make official estimates of the damage.

“There are just too many variables,” said Greg Renick, a spokesman for the Office of Emergency Services. “We don’t have a number.”

Industry estimates are usually regarded as reliable for their own payouts in disasters such as the fires, or the 1994 Northridge earthquake.

Insurance payouts from the 1994 Northridge earthquake amounted to more than $12 billion, and government payments reached an additional $12.5 billion.

But after the Northridge quake, the Office of Emergency Services estimated total losses at about $40 billion, meaning that many losses were paid by the victims.

Homeowners and commercial property owners are usually better insured against fires than for earthquakes.

Only a minority of property owners carry earthquake coverage. So, presumably in the case of the fires, the insurance payout would be a bigger percentage of the total loss.

The Insurance Services Office said Monday that it had finished examining the losses and estimated insurance payouts for the two largest of at least 10 major wildfires that occurred in Southern California between Oct. 25 and Nov. 4.

The biggest blazes were the Cedar fire, which the Insurance Services Office said destroyed more than 2,200 buildings and burned 280,000 acres in and near San Diego, and for the Old fire near San Bernardino, which it said destroyed more than 1,100 buildings and burned more than 150,000 acres.

The Insurance Services Office estimated that insurers would pay out $2.04 billion for damage that occurred in the two fires.

However, Davies, of the Personal Insurance Federation, said that by the time the Insurance Services Office finishes examining all the fires, estimated payouts will rise to between $2.5 billion and $3 billion.

“Probably, the total won’t be known for another month,” Davies said.

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Wildfire insurance claims

Insurance Commissioner John Garamendi on Monday released numbers on how much insurance companies might have to pay out for the October wildfires. These numbers represent the maximum limits for insurance claims that have been filed so far:

San Diego County: $1.39 billion

San Bernardino County: $1.35 billion

Ventura County: $156 million

Los Angeles County: $84 million

Riverside County: $13 million

In overlapping county boundary areas where a specific county-by-county breakdown was not yet available: $443 million