Insurance companies will pay to rebuild most of the homes that were burned down. But even if the newly rebuilt homes are identical to the old ones in all respects, the Butte Fire homeowners will still have a loss. The fact is that a home in the area simply won’t be worth what it was before the fire. The area has changed for the worse and won’t return to what is was for many years.
The law refers to the loss as a residual “diminution in value.” When, as here, the loss is the result of a fire caused by a utility company’s wrongdoing, the law requires the utility to compensate the homeowner for that diminution in value. That was the argument we made for the homeowners in the San Bruno Fire cases. The compensation each San Bruno victim was entitled to from PG&E included, among other things, the difference in their home's value before the fire and after it has been rebuilt.
The Butte Fire victims are entitled to nothing less.