A car sits in the garage of an apartment building destroyed by the Valley Fire. Paul Kitagaki Jr. pkitagaki@sacbee.com
A car sits in the garage of an apartment building destroyed by the Valley Fire. Paul Kitagaki Jr. pkitagaki@sacbee.com

Fires

Valley, Butte fires among costliest ever at $2 billion in damages

By Dale Kasler

dkasler@sacbee.com

October 14, 2015 12:42 PM

UPDATED October 14, 2015 10:56 PM

The first solid estimate of the economic harm caused by the Butte and Valley fires has arrived, and it’s a staggering number: nearly $2 billion in combined damages.

The report by insurance company Aon Benfield confirms state officials’ fears that the twin wildfires, which transfixed much of Northern California during a two-week stretch in September, were among the costliest in the state’s history. The fires burned thousands of homes and other buildings, and left six people dead.

Aon Benfield, a division of global insurance giant Aon plc, said the Valley fire, which rampaged through 76,000 acres in Lake, Sonoma and Napa counties, caused at least $1.5 billion in damage. Destruction from the Butte fire, covering 71,000 acres in Calaveras and Amador counties, was pegged at $450 million.

The Oakland Hills fire of 1991 remains the most expensive fire in California. The Oakland losses covered by insurance were pegged at $2.67 billion when adjusted for inflation.

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Of the Valley fire’s damage, Aon said an estimated $925 million is covered by insurance. If that figure holds, the Valley fire would rank as the fifth-worst wildfire insurance disaster in California’s history, according to figures compiled by the Insurance Information Institute.

Aon said the insured losses for the Butte fire will come to an estimated $225 million.

Economist Jeff Michael said the economic damage is considerable. The two hardest-hit counties, Lake and Calaveras, are rural counties that have generally lagged in the California economic recovery. Before the fires started, unemployment stood at 8.2 percent in Lake County and 7.9 percent in Calaveras in August, the last month for which statistics were available. Both figures were well above the statewide unemployment rate of 6.1 percent.

“It’s a huge loss in wealth,” said Michael, director of the Center for Business and Policy Research at the University of the Pacific. “There’s a lot of uncertainty, even though a significant amount of it is insured.”

The two counties could face the same phenomenon as the tiny Siskiyou County town of Weed, which lost a third of its homes in a fire 13 months ago. Some of Weed’s burned-out property owners have moved elsewhere because their insurance proceeds weren’t sufficient to rebuild.

In Lake and Calaveras counties, “there’s a lot of uncertainty about whether that (money) will be invested in rebuilding or not,” Michael said. “Those individuals may choose to relocate.”

Matt Perry, the Lake County administrator, said he hopes many residents can begin rebuilding as early as next spring, but he knows the process won’t be easy.

In some cases, “these were century-old homes, lots that don’t conform to current building standards,” Perry said. “There’s a lot of issues to work through.”

Aon’s estimate shows that $800 million of losses won’t be covered by insurance. That isn’t surprising, either, as officials have said many of the homes that burned in the rural regions were uninsured or under-insured. State officials have said they hope at least some of the uninsured losses will be covered with disaster relief from the federal government.

“There are some programs for uninsured folks, FEMA has told me,” Perry said, referring to the Federal Emergency Management Agency.

The economic figures also underscore the impact of the drought, which is believed to have contributed to the severity of the two wildfires. Already, 2015 is the costliest year for U.S. wildfires since 2007, and Steve Bowen, an Aon meteorologist and co-author of the company’s monthly “Global Catastrophe Recap,” said the Valley and Butte fires account for the vast majority of the $2.3 billion in fire-related damages recorded nationwide.

Bowen said Aon’s figures don’t include the costs of fighting the blazes.

The state won’t make an official estimate of the fire damage, but California insurance industry officials said they weren’t surprised at the Aon numbers.

“You’ve got 3,000 structures that are burned, you’ve got business losses. ... It’s pretty staggering what happened,” said Nicole Mahrt of the Association of California Insurance Companies.

Cal Fire said the Valley fire destroyed 1,958 homes and other structures, while the Butte fire claimed 863 structures.

Bowen said it’s typical for about half the losses from a wildfire to be uninsured. Flooding is far worse, he said; typically only about one-fifth of the property damage is covered.

Video: Aftermath of the Valley Fire in Anderson Springs

Residents of Anderson Springs, which was devastated by the Valley fire, cope with the massive losses of lives, homes, pets and precious belongings. Miraculously, some homes were spared: "Our house was there. I don't know how. I dropped to my knees and praised God," says Sheila Roseneau.

Dale Kasler: 916-321-1066, @dakasler