California lawmakers block Newsom’s push to limit wildfire liability

SACRAMENTO, Calif. —

California lawmakers have blocked Gov. Gavin Newsom from pursuing his plan to prevent insurance companies in California from recouping their losses from investor-owned utilities that cause a catastrophic wildfire.

Four sources who spoke on the condition they remain anonymous, said the negotiations broke down late Thursday night during a closed-door meeting between the governor’s staff and Democratic state lawmakers who are part of a working group on wildfire liability. Even though talks continued late Friday night, lawmakers would not budge on the issue.

The push to shift some of those wildfire liability costs onto insurers was part of a broader plan the governor has been pushing to limit who and how much the state’s three investor-owned utilities pay when they cause a catastrophic wildfire. The governor wanted to end what’s known as subrogation, a process in which insurance companies recoup losses from utilities after the companies pay wildfire claims for damaged or destroyed property.

The CEOs of major insurance companies warned this would cause premiums to skyrocket and risked destabilizing the state’s insurance market again.

The governor has been pushing this plan with fears that a future wildfire caused by an investor-owned utility could drain the state’s wildfire liability fund that is funded by ratepayers and shareholders and risk bankruptcy for the investor-owned utility companies.

Facing frustration from some lawmakers and the insurance industry, the governor’s office attempted to pare down the proposal late Thursday afternoon by offering to end subrogation in phases instead of eliminating it immediately. The plan still did not sit well with the Democrats in the State Senate, according to the sources. On Friday night, sources said his office proposed to limit subrogation payments by 50%. The legislature still would not go for it.

The high-stakes meetings happened as lawmakers and the governor faced a deadline Friday night to put any wildfire liability changes into a bill. California’s legislative session ends Monday, Aug. 31 at midnight.

In an email obtained by KCRA 3, the governor’s office staff acknowledged Thursday night there was not a “path to take on the larger structural reform in a way to meaningfully contain costs.”

The email noted the governor’s office would still propose to ban utility CEOs from receiving bonuses if their company starts a wildfire, create a fast-pay program to speed up victim payouts, establish a statewide community wildfire strategy, restrict attorney fees, create a wildfire data sharing platform, and outlaw speculative investing in wildfire claims by hedge funds and private equity.

“All other outstanding issues are off the table,” the email read.

Right after this story was first published at around 9:30 this morning on Friday, PG&E’s stock dropped nearly 10%, while Southern California Edison’s dropped by about 5%. SDG&E’s dipped by about 1%.

On Friday afternoon, wildfire survivors praised the State Senate and Assembly for blocking parts of the governor’s wildfire liability plan that would have limited how much wildfire victims could recover.

“We are profoundly grateful to the legislators who stood up for the real fire survivors,” said Joy Chen, Executive Director of Every Fire Survivor’s Network. “They have rejected nearly all of the Governor’s original bailout terms, including his attacks on survivors’ rights to recover economic and noneconomic damages and his devastating proposal to deny recovery to smoke-damage survivors outside an artificial fire-perimeter line. Preserving these rights is an enormous victory for all Californians.”

Negotiations on the issue continued late Friday night as the governor’s office continued to try to adjust his proposal to limit subrogation. Sources close to the negotiations said his push still did not have enough support for a deal between the Senate, Assembly, and his office.

The legislature and governor did agree to put the other wildfire liability proposals like the fast pay system, limit on trial attorneys fees and utility CEO bonuses into a bill that went into print at 7:26am Saturday.

No legislation was filed carrying the governor’s proposal to limit or end subrogation.

“Nonetheless, this system needs full structural reform — not a partial one,” the governor said in a statement. “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.”

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