Edison Unit Faces Double Legal Whammy From Fires, Mudslides

(Bloomberg) -- Edison International’s Southern California Edison utility is already facing claims that it’s to blame for the biggest wildfire in state history. Now it’s also being accused of triggering fatal mudslides.

The two are intertwined: Lawyers seeking to prove the utility’s equipment caused the fires are also trying to show that the slides only happened after a heavy rainstorm because the vegetation that held the soil in place was scorched weeks earlier.

Under California’s law of inverse condemnation, even if the utility did nothing wrong, it could still be held legally responsible for property damage from both catastrophes, according to Gerald Singleton, a lawyer who’s filed multiple complaints against SoCal Edison on behalf of property owners.

“If they are found to have started the fire and the fire then caused the mudslide, then they are definitely on the hook for the damages,” he said.

The devastating December fires in Southern California have already wiped out $6.3 billion of Edison’s market value as Wall Street weighs whether the utility giant will end up footing the bill. While the cause of the blazes have yet to be confirmed, lawsuits are piling up in state court. Northern California’s biggest utility, PG&E Corp., is fighting similar claims in more than 100 suits lodged by property owners and others affected by a rash of fires in October.

The Thomas fire that raged in Santa Barbara and Ventura counties starting in December set a new state record by burning more than 280,000 acres. While it also claimed the life of a firefighter and burned more than 1,000 structures, it wasn’t nearly as destructive as the Northern California fires.

“In regards to the potential causes of the Thomas Fire, we understand that Cal Fire’s investigation is ongoing, and it would be premature for SCE to speculate about potential litigation associated with the recent mudslides,” SoCal Edison said in a statement.

Edison could face as much as $7 billion in liabilities related to the fires, JPMorgan Chase & Co analysts wrote in a Jan. 11 note. Edison has plunged more than 23 percent since the start of the Thomas fire, closing at $61.42 on Friday.

The biggest legal exposure from the mudslides may come not from the destruction of dozens of homes in the pricey town of Montecito, but from the death toll. At least 18 people had died as of Friday and dozens of others were still missing, according to press reports.

The utility would need to be shown to have acted negligently -- by failing, for instance, to properly maintain its equipment -- to be held liable for injuries or deaths. Inverse condemnation only compensates losses for property damage.

Lawyers Hunt for California Fires’ Ground Zero to Go After PG&E

Either way, it won’t be easy to win damages against SoCal Edison because of the extra step of proving that the fire caused the mudslide, according to Michael Reiter, a lawyer who has represented both victims and defendants in natural disaster cases. Each side may call on forensics experts and geologists to present dueling theories about what actually set off the slides.

“There’s a distance in time from the fires,” he said. “It wasn’t the fire that did it directly. It was the rain. That’s a much more difficult case.”

Still, he said, the potential for big damages from wrongful death claims should be a cause for concern for the utility, “especially in Montecito, where you would expect them to have higher earning capacities.”

Singleton said that in the case of a much smaller fire in eastern Los Angeles in 2013, he secured a $103 million settlement on behalf of a combination of fire and mudslide victims over a blaze that started when two powerlines slapped together.

“Areas where wildfires or human modification of the land have destroyed vegetation on slopes are particularly vulnerable to landslides during and after heavy rains,” according to the Centers for Disease Control and Prevention.  

In his latest litigation, Singleton said one of his clients will be an employee at his law firm whose house was covered in mud and whose car was washed into the Pacific Ocean.

“Fortunately, no one was injured in her family,” he said.

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