PG&E's Potential Liability in California Fires Could Exceed Insurance Coverage

As wildfires that have claimed 48 lives rage in Northern and Southern California Wednesday, 3,000 miles away Wall Street was turning its back on shares of electric and gas utility PG&E Corp. (PCG)  as the stock plunged.

The company filed an 8-K document with the Securities and Exchange Commission saying that if it was found liable for the blaze its insurance will not be able to cover the damages. 

"While the cause of the Camp Fire is still under investigation, if the Utility's equipment is determined to be the cause, the Utility could be subject to significant liability in excess of insurance coverage that would be expected to have a material impact on PG&E Corporation's and the Utility's financial condition, results of operations, liquidity, and cash flows," the filing said Tuesday. 

The stock fell almost 22% on Wednesday, Nov. 14, and has declined more than 50% over the past five sessions. PG&E wasn't the only stock to suffer from Camp Fire fallout Wednesday, however. 

The Travelers Companies Inc. (TRV) , which has an 8.8% insurance market share in California with premiums totaling $365 million, according to a briefing from A.M. Best Co. Inc, was falling nearly 4%. 

"It's too early to estimate the damages from the wildfires, but A.M. Best expects that 2018 losses will be at record levels for California," Wednesday's briefing said.

Traveler's is one of the Dow's biggest decliners Wednesday as the blue chip index falls triple digits

While the origin of the Camp Fire blaze that has scorched 130,000 acres of California forest is still unknown, there are signs that PG&E's power lines may be partly to blame. 

The San Jose Mercury News reported that a business owner in a North California town near the origin of the fire received an email from the PG&E alerting her that workers were being dispatched to fix a sparking problem on a nearby power line. 

That news followed the revelation of a firefighter radio transmission that suggested that a malfunctioning PG&E power line may be responsible for the most destructive wildfire in the state's history. 

On Tuesday, PG&E said that the email in question was concerning upcoming work on a different transmission line than the one that is currently under scrutiny, according to the Mercury News. 

Last year, PG&E took a $2.5 billion pretax charge in connection with wildfires that the state said were caused by trees coming into contact with the utility's power lines. Those fires resulted in the deaths of dozens of people while hundreds of square miles burned. 

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