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The spread and intensity of the wildfires raging in California call for a far higher level of fire prevention, containment and disaster management than the state has had previously. Property owners and developers, fire departments, utilities and other entities need to strengthen collaboration, and revisit building codes and insurance industry practices, according to experts at Wharton and the University of California, Berkeley.
At last count, three major fires are still active in the state, claiming 44 lives and destroying more than 7,000 properties as they burned through more than 220,000 acres. The state has “Red Flag” warnings in place, which means conditions are ripe for further fires. President Trump issued a “Major Disaster Declaration” for California, responding to a request from Gov. Jerry Brown over the weekend. Such a declaration enables the Federal Emergency Management Agency (FEMA) to provide a range of federal assistance programs.
“We need to figure out ways where the State of California, insurers, utilities and residents can take steps to reduce these losses in the future,” said Howard Kunreuther, Wharton professor of operations, information and decisions, and co-director of the school’s Risk Management and Decision Processes Center.
A number of efforts are already underway in fire prevention and management in the state. “[We’re] doing the obvious things you might think in a fire-prone area,” said J. Keith Gilless, professor of forest economics and dean emeritus of the College of Natural Resources at the University of California at Berkeley.
Kunreuther and Gilles discussed ways in which the government and individuals could respond to the fires and help prevent future disasters on the Knowledge@Wharton radio show on SiriusXM. (Listen to the podcast at the top of this page.)
All Hands on Deck
Many in California took umbrage at President Trump’s tweet last weekend in which he blamed the fires on “gross mismanagement of the forests,” said Gilless. He noted that Gov. Jerry Brown has recently set up a forest management task force, adding that he hoped those efforts will continue in the administration of the next governor, Gavin Newsom, who will assume office in January.
Gilless listed some the other major steps the state is taking. Cal Fire, or the California Department of Forestry and Fire Protection, is investing in expanding its air fleet, especially the C-130 aerial suppression aircraft, and is upgrading its helicopter fleet. The state is also an active participant in the Firewise USA program of The National Fire Protection Association, which focuses on educating the public about fire and loss prevention.
“We need to figure out ways where the State of California, insurers, utilities and residents can take steps to reduce these losses in the future.” –Howard Kunreuther
In addition, California is “rapidly investing” in safety personnel and procedures through its Board of Forestry and Fire Protection, which Gilless chairs. “We have a large number of pre-fire engineers working at Cal Fire that are going through county by county and city by city, looking at compliance with regulatory codes on road networks, signage and access to water,” he said. (Pre-fire planning typically involves fire department, and property owners or managers taking measures to both prevent fires, and if they occur, managing them efficiently to protect people and property.) “We’re investing in the science of zoning hazards to see how nuanced the local protection measures should be.”
Also underway are a quarter of a million inspections that focus on the responsibilities of the state and homeowners on multiple fronts, such as the need to properly maintain vegetation around houses in order to increase fire resilience. The state has the personnel and the funding to track fire-prone homes in the affected areas in a three- to five-year cycle, Gilless said.
Gilless noted that experiments are also taking place with innovative bond offerings to finance projects to help prevent wildfires. One is a $4 million “forest-resilience bond” created by the nonprofit World Resources Institute and start-up Blue Forest Conservation, according to a Los Angeles Times report. The bonds aim to find “profit-seeking investors” willing to invest in projects that reduce the risk of costly wildfires and potentially ease the risk of drought.
Other state programs focus on vegetation management and studying tree coverage to ensure that there is sufficient separation between the canopies. Wooden roofs obviously pose risks, and there are also efforts find fireproof alternatives. “That is important with these wind-driven fires of 50 to 60 miles an hour, because they’re throwing embers which can ignite a roof a half a mile or a mile in advance of the flaming front of the fire,” Gilless said.
Some aspects cannot be legislated, though, such as people’s preferences on where they want to live. That issue has come into sharp focus in the latest wildfires, especially with respect to the town of Paradise in the Sierra Nevada foothills that has borne the brunt of the so-called Camp Fire’s deaths and damage. The community in Paradise had grown “dramatically” both because of commuters looking for more affordable housing and retirees moving in, said Gilless. The influx of retirees has been a major economic driver for the local economy, since “[they] bring wealth and pension assets that were accumulated working in urban areas,” he added. “We’ve had a tremendous movement in creating more and more of this wild land-urban interface [in Paradise]. That growth is projected to continue – people move up there both for economic reasons and for the quality of life.”
Getting Homeowners to Act
Clearly, there is recognition that homes have to be better designed and fireproofed, said Kunreuther. “But the challenge is, how do you get homeowners to do this? A homeowner could say, ‘I may do all of these things, but then there’s going to be a fire from my neighbor that is going to spread to my house and I’m still going to be in trouble afterwards.’ The interdependency and interconnectedness of wildfires makes it really hard [to implement those measures].”
“Your experience as an individual with a natural hazard conditions your thought process and the actions that you’re willing to take to deal with it.” –J. Keith Gilless
Kunreuther said it is important to revisit building codes and related regulations in the affected areas to ensure that homeowners take the requisite steps for fire prevention. He suggested that the state could consider ways to finance those investments with low-interest loans or grants. In addition to residents, utilities and insurers have “to play a role in terms of cleaning things up and making fires less likely to spread from one area to another.”
According to Kunreuther, a first step is to increase awareness about the hazards of wildfires within local communities. “It’s a really challenging issue when people have to shell out money to try to make their house safer and are asking themselves if that money is really doing the trick, because they know that the fire could spread from elsewhere.” Communities and the state could help homeowners appreciate the interconnected nature of wildfires, and bring relevant regulations and standards, he suggested.
Gilless called for stronger collaboration between insurers and homeowners or communities in how they could be better prepared for wildfires. “It’s not currently the case that there’s a strong feedback loop between mitigation actions and the insured risk.”
Insurers vs. Utilities
Kunreuther noted that home insurance policies typically cover fire from any source, including wildfires. However, here again, he sensed a challenge for both insurers and the utilities. Insurers could ask the utilities to pay the claims if they feel the latter was the cause of the fire, he said. “Electric utilities may also cause wildfires when high winds bring down power lines or conductors or when animals, trees, or other vegetation make contact with power lines,” noted a recent paper published by the Risk Management and Decision Processes Center.
Insurers could pursue utilities for claims using a so-called “subrogation” clause where they have the right to pursue a third party for a loss, Kunreuther said. Insurers could use a legal provision for what is called “inverse condemnation,” if they could establish that a utility caused a fire. (Public utilities are granted the power of condemnation, or eminent domain, to take over private properties in the course of discharging their regulated activities, but the reverse, or “inverse condemnation,” occurs when the affected private party brings a claim.) “The utilities may have to pay even if they follow all the regulations and standards,” he said. “If a tree is blown down and destroys a power line that has been meeting all these standards, the utilities may still be responsible in California because of this law.”
In September, California passed a bill that protects utilities from claims resulting from wildfires and forces their customers to foot the liability bills. Gilless said he expected disagreements over those legal provisions to continue for several years, and that the state is yet to make decisions on how best to modify existing laws.
“If it turns out that these steps are not taken now, there will be a tendency to go back to the status quo.” –Howard Kunreuther
A Changed Mindset
“Most times people don’t want to think about something like a wildfire, but today they’re thinking a lot more about them because of just exactly what’s happening in California,” said Kunreuther. “If you haven’t experienced an event, you are going to have a harder time taking steps to prepare for it and invest in it.”
However, that may not be true of Californians any more. The spate of wildfires in the state in recent years has heightened residents’ sensitivities to those hazards, unlike say, among those that may live on flood plains or along fault lines with the risk of earthquakes once every 50 or 100 years, said Gilless. “Your experience as an individual with a natural hazard conditions your thought process and the actions that you’re willing to take to deal with it.”
Kunreuther said he hoped that the state government, the state legislature and communities take the needed steps to address the problem of wildfires, instead of putting them off for later. “If it turns out that these steps are not taken now, there will be a tendency to go back to the status quo,” he cautioned.