The Dixie Fire Destroyed My Home.  Should I Sell My Burnt-out Lot?

Trespass by Fire

If the Dixie Fire destroyed your home, the law of “Trespass by Fire” applies.  If it is proven that PG&E started the Dixie — and it sure looks that way — that law would allow you to recover against PG&E either your property’s diminution in value resulting from the fire, or the cost of restoring the property to its previous condition, but not both.  The estimated cost of restoring the property is almost always substantially higher than the property’s diminution in value, and that’s what most folks would opt for.  But once you sell your lot, you are pretty much stuck with claiming against PG&E only the property’s diminution in value.  You cannot recover the costs of restoring the property.

Diminution in Value versus Cost to Repair

Say your home had a market value before the Dixie Fire of $300,000.  Say, further, that the burnt-out lot is worth $10,000.  Your diminution in value claim against PG&E is $290,000, reduced by any insurance proceeds you received for the structure.  Say insurance paid you for the structure $250,000.  That leaves you with a net diminution in value claim against PG&E of $40,000. 

It may cost $450,000 or more to rebuild your house.  Accordingly, your “cost of restoration” claim against PG&E would be $450,000, quite a bit higher than your diminution in value claim.  Reduced by the $250,000 you received from your insurance for the structure, your net cost of restoration claim against PG&E would be $200,000.  That’s less than the $450,000 total, but quite a bit more than the net $40,000 diminution in value claim.  See more about the numbers here.

Here’s the Catch

To make cost of restoration claim, you must have a “genuine desire” to rebuild your home.  Most folks, were they handed the necessary cash today, would love to be put back in the position they were in before the Dixie fire, as though the fire never happened.  Therefore, most Dixie Fire survivors will be deemed to have a genuine desire to rebuild and therefore will quality for a cost-to-rebuild claim.  But once you sell your burnt-out lot, it is impossible for you to rebuild.  That means in most cases you will be stuck with the claim for your home’s diminution in value.

Bottom Line

PG&E is hoping that you sell your lot before your Dixie Fire claim is settled.  If you sell, they will likely get away with paying you less.