Smokehouse Creek wildfire victims line up lawsuits against utility

People in the northern Panhandle are recovering from the devastation brought by the Smokehouse Creek fire –  the state’s largest recorded wildfire, which burned through more than 1 million acres in late February and early March.

Two people were killed, ranchers lost livestock, and millions of dollars worth of property was damaged in the fire, which was caused by a downed electric pole belonging to Xcel Energy. Now, the power company is the target of multiple lawsuits from people who lost assets during the blaze.

Charles Silver, the Roy W. and Eugenia C. McDonald Endowed Chair in Civil Procedure at the University of Texas at Austin School of Law, spoke to the Texas Standard about whether victims can expect to be compensated for their losses. 

This transcript has been edited lightly for clarity:

Texas Standard: One group of people sued Xcel Energy in a class action lawsuit in early March. Another class action filed earlier this week. Why are plaintiffs getting lumped together like this when presumably they suffered different levels of loss from the fire? Could you explain that? 

Charles Silver: Sure. Not all of them will be in a class action; probably the personal injury and death cases will not be. But it’s very common in these mass disaster kinds of situations to bring lots and lots of claims together for a variety of reasons.

One is that there are just so many, so trying to process them individually would be very difficult for the courts.

The other is that, if there ever is a settlement, you want to try to encompass everybody in it – or at least as many people as you can – and a class action can facilitate that. 

How long do these kinds of class action cases typically take, or is there a “typical” here? 

It obviously depends upon many things, including whether the defendants decided to put up a fight and how much insurance coverage there might be, if any; whether the insurers decide to put up a fight.

It’s very difficult to predict with these things, but it’s a safe bet that it will be years. 

What is it that the people suing Xcel Energy have to prove in these cases to get compensation for their losses? 

Unless there’s a regulatory structure, which I’m not familiar with, they’re going to have to prove that there was a duty on the part of Xcel to use reasonable care. They’re going to have to prove that Xcel breached that duty by failing to repair the utility pole before it broke.

And then they must prove cause – which doesn’t seem like it’s going to be so difficult, just as an outsider – meaning that they must prove that the utility pole actually caused the fire, which then spread throughout. And finally, they have to prove out their damages. 

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Xcel isn’t just facing lawsuits from the Smokehouse Creek fire. A number of people in Colorado have also sued Xcel stemming from a fire north of Denver in December of 2021. What happens if the company can’t pay out all these claimants? I mean, how much of an issue is it should Xcel decide to look to other ways to protect its assets? 

Very common for defendants not to have sufficient funds to compensate everybody who is harmed as a result of a mass accident. And that can result in one of multiple things happening.

One is you really want to know how much insurance there is, because the insurance may greatly exceed the value of the company, but you never know until you get into it.

And the other is insolvency. There are procedures for working out claims. We usually think of them as bankruptcy. And at that point, the company, the defendant will be liquidated and the value of its assets will be distributed amongst the claimants.

It’s a pretty rough road for claimants, though, once you start out, because the tort creditors are sort of at the back of the line. They’re really, really low in priority as far as payments are concerned. 

I think a lot of people wonder whether or not class action claimants really receive what they deserve as a result of the damages. I mean, are people generally made whole as a result of these kinds of lawsuits, or is recovering a fraction of your losses more likely? 

It varies enormously. There are some contexts in which it’s very common to recover pennies on the dollar of loss, but there have been many class actions in which class members recovered 100 cents on the dollar of loss.

It depends on so many different things – primarily, though, the availability of assets. You know, if all the defendant has is $0.10 on the dollar, you can’t recover more than $0.10 on the dollar. That’s just, you know, math. So, it’s possible that they’ll get meaningful compensation here, but it’s way too soon to tell.