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26 May 2013
Power distribution company SP AusNet, the subject of two class actions over Victoria’s Black Saturday bushfires in 2009, says it may not have enough insurance cover to pay out all damages if the actions succeed.
The class actions, led by lawyers Maurice Blackburn, claim the Kilmore East-Kinglake and the Murrindindi-Marysville bushfires were caused by faults in SP AusNet’s power transmission system and are seeking as yet unspecified damages for residents of those areas.
SP AusNet is a public company that is 52% owned by Singapore Power. After the launch of the Murrindindi action last week, it released a statement to the Australian Securities Exchange saying it “maintains insurance that it believes is appropriate to protect against bushfire and other major operating risks”.
“Should SP AusNet be found liable for losses in respect of the Kilmore or Murrindindi fires, the extent of those losses is not known and therefore it is not known whether SP AusNet’s insurance will be sufficient to cover all losses associated with the February 2009 bushfires.”
While no figures have been released for the claims, they will be very significant because of the size of the fires, with property damage alone in the Kilmore fire estimated by some legal sources to total $800 million.
The Kilmore fire killed 119 people and destroyed 1242 homes while the Murrindindi fire killed 40 people and destroyed 538 homes.
The Murrindindi claim was filed last Tuesday and has no scheduled court date while the Kilmore claim is due in court in January.
The Victorian Government is also pursuing SP AusNet for $22 million in damages over the Kilmore fire.
In May a class action against SP AusNet and the Victorian Department of Sustainability and Environment over Black Saturday fires at Beechworth was settled out of court for $32.8 million with SP AusNet’s share being $19.71 million.
That settlement was based on a formula of a payout of 40% of the losses caused by the fires. On that formula the damages totalled $82.12 million, a far smaller figure than will come out of the Kilmore and Murrindindi fires.
Insurers picked up the tab for SP AusNet in the Beechworth fires but the overall size of its cover is unknown.
Analysts say a useful reference point for SP AusNet’s likely insurance cover is the float of Spark Infrastructure, another regulated power network, in 2005.
At the time Spark had a regulated asset base (value of poles, wires and transmission equipment) of $5.1 billion and insurance cover of between $800 million and $1 billion.
SP AusNet’s regulated asset base is now $6.64 billion so if it had the same ratio of insurance to regulated assets it would have insurance cover of between $1 billion and $1.3 billion.
Recently Australia’s largest class action was settled out of court, awarding $200 million to the shareholders of Centro property group after the company and its auditors did not keep them informed about its debt situation.
The bushfire cases could involve larger awards than that.
Centro was liable for $133 million of the $200 million payout and of this $38 million came from its insurer Chartis.
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