California legislators have turned aside Gov. Gavin Newsom’s bid to block insurance carriers from recouping wildfire-related payouts from utility companies found responsible for sparking destructive fires.
The proposed change would have barred insurers from pursuing investor-owned utilities for reimbursement after paying claims to homeowners and businesses whose properties were damaged or wiped out in utility-linked wildfires.
Newsom’s administration argued the move was part of a broader strategy to shore up California’s wildfire liability fund and shield power companies from the kind of enormous fire costs that could push them toward bankruptcy after another catastrophic blaze.
But Democratic lawmakers ultimately declined to get behind the plan, following negotiations with the governor’s team that ran from Thursday night into late Friday, according to four sources familiar with the discussions who spoke to KCRA.
Newsom signaled that the debate over wildfire liability reform is far from over and said he intends to keep pressing for broader changes next year. “Nonetheless, this system needs full structural reform — not a partial one,” he said.
“I urge the Legislature to build on this progress next year and finish the work we started to secure the Wildfire Fund’s long-term durability, stabilize electricity rates, and ensure fire victims are never again turned into unsecured creditors in a bankruptcy proceeding.”
Large insurance companies had pushed back forcefully, warning that the proposal could drive up insurance premiums and add new instability to California’s already strained insurance marketplace.
At the heart of the clash is a process called subrogation, which lets insurers seek repayment from utilities deemed responsible for wildfires after the companies have already compensated victims for their losses.
Newsom initially wanted to eliminate the practice, but his office later offered to phase it out amid opposition.
His administration then proposed Friday night that insurers instead be limited to recovering 50% of their costs, but lawmakers rejected that compromise as well.
The negotiations unfolded ahead of a Friday night deadline to put any proposed wildfire liability changes into legislative language before California’s legislative session ends Monday at midnight.
Newsom’s office ultimately acknowledged there was no “path to take on the larger structural reform in a way to meaningfully contain costs,” said an email obtained by the outlet.
Other parts of the governor’s wildfire package did survive: Lawmakers and Newsom agreed to move forward with proposals, including faster payments for wildfire victims, restrictions on attorneys’ fees and a ban on utility CEO bonuses when their companies start a wildfire.
The package would also create a statewide community wildfire strategy and wildfire data-sharing platform, as well as prohibit speculative investing in wildfire claims by hedge funds and private equity firms.
Those measures were included in a bill that went to print Saturday morning; no legislation was filed containing Newsom’s proposal to limit or eliminate insurers’ ability to seek reimbursement from utilities.
The collapse of that part of the plan also hit utility stocks: PG&E shares fell nearly 10%, while Southern California Edison dropped about 5% and San Diego Gas & Electric dipped about 1%.
Wildfire survivors also praised lawmakers for rejecting other proposed changes they feared would restrict how much victims could recover.
“We are profoundly grateful to the legislators who stood up for the real fire survivors,” Joy Chen, executive director of Every Fire Survivor’s Network, said Friday.
Chen said lawmakers had rejected “nearly all of the governor’s original bailout terms,” including proposed restrictions involving economic and non-economic damages and smoke damage outside designated fire perimeters.
“Preserving these rights is an enormous victory for all Californians,” she added.
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