Insurers Sue For New Mexico Fire Expenses

By Gary Mogel

The fire was caused by a "controlled burn" intended to clear brush, which spread and caused $180 million in losses and left 425 people without homes. An investigation revealed that the government official who ordered the burn failed to check weather reports that predicted dry air and high winds.

Safeco Insurance Company of America, California Casualty Group, Unitrin Insurance Company and Farmers Insurance have sued the Cerro Grande Fire Claims Office, part of the Federal Emergency Management Agency, in U.S. District court in Albuquerque to recover $1.4 million in additional overhead expenses from adjusting those claims, said Eric Jeffries, managing partner of Jeffries & Rugge, law firm in Albuquerque.

Such expenses, according to Mr. Jeffries, include the cost of hiring independent adjusters for the overload work, meals and hotels for on-site employee-adjusters, moving equipment to the affected areas, and opening temporary claims offices.

The Cerro Grande Fire Assistance Act authorized the federal government to reimburse to businesses their extra expenses caused by the fire. The insurers claim that the Fire Claims office has denied their reimbursement requests because government officials interpret the statute's definition of "injured parties" to include individuals and businesses, but not insurance companies, Mr. Jeffries said.

A separate federal law?the Department of Homeland Security appropriations bill?established subrogation procedures under which insurers can collect loss payments [as opposed to the overhead expenses] from the federal Emergency Management Agency.

Mr. Jeffries pointed out that there were other insurers in addition to the four plaintiffs in this case that could have made similar claims, but "they thought it wasn't worth it" or didn't keep records that would have allowed such claims to be pursued.

FEMA's Denton, Texas office, which handles New Mexico, did not return a call for comment.