Lawsuit vultures are circling California’s wildfire fund

By Adam Kovacevich

Governor Gavin Newsom wants to add $18 billion to the California Wildfire Fund, which provides a critical safety net for wildfire victims and the utility companies that power the state. As Sacramento considers the proposal, state lawmakers should also ensure that the Wildfire Fund delivers for Californians and stop third parties from profiting at their expense.

When Pacific Gas and Electric (PG&E) was found liable for the devastating 2018 Camp Fire in Northern California, the fallout forced the utility into bankruptcy. Of course, corporations must be held accountable for negligence, especially when it has deadly consequences.

But when a major utility goes bankrupt, it’s not just shareholders who pay the price. Everyday Californians end up footing the bill through higher rates, service disruptions, and a less stable grid.

To prevent that kind of chaos, state lawmakers created the California Wildfire Fund in 2019. The idea was to guarantee wildfire victims timely compensation while keeping utilities solvent.

In theory, it’s a win-win. In practice, the fund is becoming a feeding frenzy for Wall Street profiteers and trial attorneys, eating away at public dollars intended for recovery.

Estimates for claims from January’s Eaton and Palisades wildfires, which killed dozens and destroyed thousands of homes, range from $20 billion to as high as $45 billion. That’s enough to drain the fund entirely, according to the California Catastrophe Response Council. Most of these claims stem from legitimate harms, but a cottage industry has sprung up to turn disaster into profit.

Plaintiffs’ attorneys can take contingency fees as high as 50 percent of settlements, straight from the fund. Behind them, hedge funds and litigation financiers are bankrolling lawsuits with high-interest, non-recourse loans – sometimes exceeding 20 percent annualized – in exchange for a handsome cut of the winnings. Some funds are even buying insurance subrogation rights, effectively placing bets on taxpayer-backed wildfire payouts.

In other words, Wall Street is gambling with wildfire relief and cashing in on public money.

State officials are rightly sounding the alarm. The Response Council has urged changes to ensure most of the fund goes to actual recovery, not middlemen, and to push utilities to settle claims responsibly.

But that won’t be enough, because the real problem is bigger than the Wildfire Fund itself. As soon as public money becomes a litigation target, predatory lawyers swarm in. Look at the Los Angeles city budget, where liability payouts have jumped 220 percent over budget to an unprecedented $320 million this year. To pay those claims, Los Angeles has to dip into its General Fund, siphoning millions away from libraries, parks, schools, and other social services.

Californians deserve a system that protects both access to justice and public resources. That means capping legal fees for predatory lawyers, blocking hedge funds from buying subrogation rights, and limiting third-party profiteering. It also means holding plaintiffs’ attorneys to higher standards in how they settle.

Without reforms, opportunistic financiers and trial lawyers will keep draining dollars meant for rebuilding homes, schools, and communities.

The Wildfire Fund was created to help survivors recover, not to enrich intermediaries. Lawmakers need to close the loopholes now before the vultures pick it clean.

Adam Kovacevich is founder and CEO of the center-left tech industry coalition Chamber of Progress. Adam has worked at the intersection of tech and politics for 20 years, leading public policy at Google and Lime and serving as a Democratic Hill aide.