Update on Southern California Fires

The following is a second installment of information I am providing for those friends and extended family impacted by the fires. It is my hope that providing access to answers to basic questions is of help to those in need. Feel free to pass this information along to those who may need it.

I was moved by the responses I received to our first installment of information provided last week. The first installment provided some suggestions on what rights insureds have under an emergency declaration of disaster when making insurance claims for those losses. Some friends and colleagues it was sent out to were also lawyers, so in those situations I prefaced it by saying to them I recognize you likely know these legal remedies and could do this research yourself, but I am hoping this helps anyway? Fortunately, everyone graciously responded that it was helpful information either because it is not in their area of specialty, or experience, or the devastation that they and their families have suffered simply made it difficult to focus, and found it too early to even think of these issues. So, I hope this second installment similarly helps.

And, as always, feel free to contact me or my partners at our law firm for any questions you may have. Whatever we can answer we will, and for those questions that are better answered by others outside our firm we will do our best to get the answer for you, and or refer you or make introductions to those with that area of specialty.[1]

WHERE TO FIND ANSWERS:
The State of California is maintaining a website page that provides access to many resources for information on varied topics that will be of use to those impacted by the wildfires.

This information is useful whether one has suffered total or partial destruction of a home or business, or charred or smoke damage to structures, or even if it’s “just” the inability of residents to return to a home, or “just” the inability of employers and employees to return to a business still standing. See: State Resources Page And when you click this hyperlink and get to the web page provided by the State, make sure to then scroll all the way down, as there are many resources provided which are not particularly visible at the top of the page.

While I wish I could say the federal government disaster relief website is as helpful as the State’s webpages for same, unfortunately I cannot. There is some news that the federal government is providing $770 immediately for basic human services, food, shelter and the like. However, further information is not easily accessible. There is a Disaster Resource web page clickable at federal webpage, and a physical location at FEMA DISASTER RECOVERY CENTERS (DRC) at UCLA Research Park (previously known as The Westside Pavillion) at 10850 Pico Blvd, LA 90064.

PRICE GOUGING DURING A DECLARED STATE OF EMERGENCY IS ILLEGAL:
Rental bidding wars resulting in unlawful price increases are prohibited under California’s price gouging statute, Penal Code section 396, when as here a state of emergency has been declared. These protections generally prohibit raising the price of lodging and rental housing after an emergency is declared by more than 10 percent of the previously charged price.

Similarly, price gouging for food and other basic services is prohibited by Penal Code 396.
The full text of the statute, Penal Code 396, can be found by clicking here.  The Attorney General and local prosecutors can enforce the statute.

TAX BENEFITS AND TAX RELIEF:
The California Franchise Tax Board (FTB) and the IRS will provide state disaster tax relief for taxpayers and businesses affected by the recent wildfires in Los Angeles. The FTB and the IRS are maintaining website pages that explain the following:

Taxpayers in Los Angeles County will be granted a postponement to October 15, 2025, to file California tax returns on 2024 income and make any tax payments that would have been due January 7, 2025, through October 15, 2025. This and other benefits are explained by clicking California provides tax relief for those affected by LA wildfires

These benefits align with the federal extension recently granted to California’s wildfire victims. The federal extension hyperlink in the foregoing sentence should be looked at directly, and which in part says as follows:

Individuals and businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (in this instance, the 2025 return normally filed next year), or the return for the prior year (2024). See Publication 547, Casualties, Disasters, and Thefts, for details.

The IRS explains that qualified disaster relief payments are generally excluded from gross income. In general, this means that affected taxpayers can exclude from their gross income amounts received from a government agency for reasonable and necessary personal, family, living or funeral expenses, as well as for the repair or rehabilitation of their home, or for the repair or replacement of its contents. See Publication 525, Taxable and Nontaxable Income, for details.

Additional relief may be available to affected taxpayers who participate in a retirement plan or individual retirement arrangement (IRA). For example, a taxpayer may be eligible to take a special disaster distribution that would not be subject to the additional 10% early distribution tax and allows the taxpayer to spread the income over three years. Taxpayers may also be eligible to make a hardship withdrawal. Each plan or IRA has specific rules and guidance for their participants to follow.

Finally, in the below link is an explanation by a colleague, Rob Wood, who is a tax attorney. Per my request (since I am not a tax attorney), Rob has graciously provided his viewpoint on the tax obligations, if any, on insurance settlement payments. https://acrobat.adobe.com/id/urn:aaid:sc:VA6C2:d814eead-c216-455b-96d9-332479a59c2f

CLAIMS AGAINST THE CITY OF LOS ANGELES DEPARTMENT OF WATER AND POWER (LADWP), AND AGAINST SOUTHERN CALIFORNIA EDISON (SCE), OR AGAINST STATE OR LOCAL GOVERNMENTAL AGENCIES

Many of us are looking to put this disaster in perspective. That analysis leads to questions of “why” and “how” and “what if anything to do about it”. Why did it happen? How did it get so bad so quickly? If I have been damaged or injured are my insurance proceeds (if any), and government assistance provided through FEMA and others, enough to fully compensate me for my losses? If I lost my job or my business as a result of these fires what remedies and rights do I have? If someone or some entity is legally responsible what are my rights and remedies that can be enforced in the court system?

The news has reported that there are already lawsuits starting to be filed seeking to identify who, if anyone, is at fault and for compensation. No doubt there will be many more. There are, however, limitations on those remedies, both in terms of time within which such claims can be made (as short as 6 months), and in the total amount of damages that can be paid.
If you have any questions about any of this, we are happy to discuss it with you.

[1]Disclaimer: Please note that information provided in this way may or may not be applicable to your exact situation, and should therefore not be considered completely reliable unless and until you confirm its accuracy and applicability with a lawyer that you retain. Whether that lawyer is someone in our law firm or someone else you retain for that purpose is your choice. A lawyer is only retained in a writing signed by the parties to that agreement, thus communications like this one do not establish an attorney – client relationship. Also, in a disaster like this one the laws and rules can change rapidly.