California lawmakers have rejected Governor Gavin Newsom’s proposal to prevent insurance companies from seeking reimbursement from utility companies responsible for wildfires. The plan, part of a broader effort to protect the state's wildfire liability fund and prevent utilities from bankruptcy, faced opposition from Democratic legislators.
Newsom's office had pushed for the change to address the financial strain on utility companies like PG&E and Southern California Edison, whose shares saw declines following the legislative decision. The practice at issue, known as subrogation, allows insurers that have paid claims to wildfire victims to seek compensation from the utilities deemed responsible for starting the fires.
Negotiations between the governor's staff and lawmakers extended into late Friday, just before a deadline to introduce legislative language for wildfire liability changes before the end of the legislative session. Newsom's office ultimately acknowledged there was no viable path to enact the broader structural reforms sought.
While the proposal to limit or eliminate insurer subrogation failed, other components of Newsom's wildfire package were approved. These include measures for faster payments to wildfire victims, restrictions on attorney fees, and a ban on utility CEO bonuses when their companies cause a wildfire. Additionally, the surviving provisions establish a statewide community wildfire strategy and data-sharing platform, and prohibit speculative investing in wildfire claims by private equity firms and hedge funds.
Major insurance companies had previously warned that Newsom's original proposal could lead to increased premiums and market instability. Wildfire survivors also expressed relief, with advocates stating that lawmakers rejected changes that could have limited victim recovery, preserving their rights to seek damages.