California’s Latest Wildfire Problem: Insuring the Tree Trimmers

PG&E’s chief executive, Bill Johnson, said the company was doing all it could. It has about 4,500 workers engaged daily in tree maintenance, he said in an interview, and by the end of the year will have felled or trimmed 1.8 million trees. It is also changing inspection procedures and improving contractor training, he added.

“This is a huge effort,” he said, “and we’re learning as we go.”

The success of that effort may help shape how insurers and investors respond to climate-related risks.

“We are marching steadily toward a future in which the private market may conclude that these are uninsurable risks,” said Dave Jones, a former state insurance commissioner. “In some ways, that’s already happened for the utilities.”

In July, California lawmakers approved a plan to create a state-backed insurance pool to expedite payments to victims after future wildfires. Homeowners in fire-prone areas who report their own insurance cancellations and skyrocketing costs are increasingly directed to secondary insurance markets or state plans, similar to flood insurance, as a last resort.

For utility contractors, there is no backstop like a state insurance program. Many are turning to costly alternatives, sometimes sold by offshore companies in places like Bermuda and lacking some of the regulation and financial guarantees of conventional policies.

The income from utility work is still enough to draw bidders. For Paul Sousa, owner of California Tree Solutions of San Jose, it meant increasing his insurance to $12 million in liability coverage from the $2 million he carried as a residential tree trimmer. But after weathering the initial costs, he said he was confident that his nine-man crew doing PG&E fire mitigation in Lake County would make the gamble pay off.

“If I hadn’t been established already, I think I would have gone out of business,” Mr. Sousa said. It also takes longer to be paid by the utility, he said, but there is an advantage to having a client with hundreds of thousands of miles to clear. “It’s better job security,” Mr. Sousa said. “They need us as much as we need them.”