California adds up the cost of wildfire damages

The total cost of battling the blaze may take some time to make up. Though the federal government will provide some disaster assistance, California taxpayers will eventually have to find the money to pay that bill.

“The folks who may really be hurt the most proportionately are the state and local governments, which didn’t have the budget for the actual firefighting and cleanup,” said Steven Levy, director of the Center for Continuing Study of the California Economy.  “We’re very thin in our budgetary process out here; most folks are running barely even. So you could have some state and local agencies with unexpected deficits from the direct firefighting costs.”

Homeowners who suffered losses may be in better shape than those who filed claims after the 2003 fires, which touched off widespread complaints after many discovered that they were underinsured. Though many have now beefed up their policies, they still face losses from deductibles and losses that may not be covered.

Insurance rates for home owners in fire-prone areas may well be raised if the insurance industry can convince state regulators they face higher risk from future fires. Those who lost their homes to fire will also be hurt by the depressed housing market, since claims are based on current market values, which have been substantially depressed by the downturn.

MSNBC video   Governator warns of fire fraud Oct. 26: Gov. Arnold Schwarzenegger and Insurance Commission Steve Poizner warns of wildfire fraud. MSNBC

About the only beneficiaries from the disasters will be those hired to rebuild. As with all natural disasters, the bulk of insurance claims and disaster assistance flows first to the rebuilding of homes and other buildings. While that will be a welcome boost for the depressed construction industry, it won’t come close to making up for the building shortfall from the ongoing slump in the home building industry, which is running about 80,000 homes a year below peak levels, according to Levy.

“It’s nowhere near the amount of homebuilding that’s been lost because of the meltdown in the mortgage market and because the prices are too high,” he said. “It would be a drop in the bucket compared to the construction losses we’ve had.”

The rapid influx of insurance claims also brings the risk of further losses, as bogus contractors and other fraud artists target unsuspecting homeowners and businesses. California Insurance Commissioner Steve Poizner said part of his agency’s 300-person enforcement unit has already been redeployed to the area to try to make sure that those who suffered losses to the fires

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don’t get burned twice.

“It’s unfortunate, but it’s like clockwork — every time there’s a natural disaster, the scam artists show up and pretend to be claims adjusters or they’re unlicensed contractors,” he said. “And the victims can be victimized again. So we’re going to nip it in the bud before it gets started.”

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