Kabateck LLP attorneys Shant Karnikian and Barret Alexander were featured in Law.com last week for their analysis of how Wall Street hedge funds are profiting billions from California wildfire relief funds while fire victims continue to struggle with recovery.
In their piece “A Plaintiff’s Lawyer’s Perspective – Stop Prioritizing Profits Over People,” the attorneys examine how hedge funds purchase subrogation claims from insurance companies for pennies on the dollar, then seek to recover 75-85 cents on the dollar from relief funds intended for actual fire victims.
The attorneys detail how Eaton fire subrogation claims are trading at just 47 cents on the dollar while Palisades fire claims are selling for as low as 5 cents on the dollar. However, hedge funds are seeking returns of 75-85 cents on the dollar, which could deplete the California Wildfire Fund’s estimated $21 billion. The attorneys reference the 2019 PG&E settlement where hedge funds like Baupost Group made $3 billion in profits from Camp Fire subrogation claims while victims were left holding volatile stock.
The attorneys propose reforms to protect fire victims, including granting the California Wildfire Fund a right of first refusal to purchase subrogation claims at the same discounted rates offered to hedge funds, and implementing a “made whole” doctrine to ensure individual claimants recover damages before hedge funds profit from wildfire recovery.
Tom Welsh, CEO of the California Earthquake Authority, supports their concerns, noting hedge funds’ desired returns could cost the Fund “hundreds of millions, if not billions, of dollars more” than necessary.
The full article can be found on Law.com (subscription required).