| California faces a common, unfortunate and alarming reality: wildfires. So far in 2022, California has faced approximately 6,739 fires covering almost 365,895 acres. Beyond and often as a consequence of damaging property, land and wilderness, wildfires can also lead to bankruptcy. One California fire did lead to bankruptcy, and it poses complex questions surrounding the rights of secured creditors in insurance policies for commercial real estate.
The 2020 “Glass Fire” served as the unfortunate precursor to Spring Mountain Vineyard, Inc.’s recently filed chapter 11. As a result of the Glass Fire, Spring Mountain faced extensive damage to its buildings and portions of its crop, with estimated damages totaling $38 million. This prompted Spring Mountain to file claims with both its primary insurer and excess insurer(s). Spring Mountain received advanced payments from its primary insurers payable to both Spring Mountain and MGG California, LLC (MGG), the secured lender. On the other hand, the claims submitted to the excess insurers received varying responses. This forced Spring Mountain to commence a lawsuit against all of the excess insurers.
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