California lawmakers block Newsom’s push to prevent insurance companies from suing utilities that cause wildfires
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, multiple sources confirmed to KCRA 3 on Friday morning.
Four sources who spoke on the condition they remain anonymous said negotiations on this 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.
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.
The high-stakes meeting happened as lawmakers and the governor faced a deadline Friday to put any wildfire liability changes into a bill. California’s legislative session ends Monday, August 31st at midnight.
In a memo 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 memo 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, 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 memo read.
This is a developing story. Check back for updates.
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