Key facts
- California Democratic lawmakers rejected Governor Gavin Newsom's broad proposal to change wildfire liability rules.
- The final compromise bill addresses a narrower set of issues than Newsom initially proposed.
- Key elements of Newsom's plan, such as preventing insurers from recouping losses from utilities and limiting payouts for emotional distress, were not included.
- The compromise bill includes measures to block hedge funds from profiting off wildfires and prevent utility CEOs from receiving bonuses after igniting a blaze.
- The bill was introduced as an urgency measure, requiring a two-thirds majority to pass.
California Democratic lawmakers have significantly scaled back Governor Gavin Newsom's ambitious proposal to overhaul the rules governing who pays when utility equipment sparks catastrophic wildfires. The governor's plan, intended to address the complex financial fallout from increasingly destructive blazes, faced strong opposition from a coalition of insurance companies, hedge funds, trial lawyers, local governments, and consumer advocates.
Lawmakers ultimately introduced a compromise bill that tackles a narrower, less controversial slice of the issue than Newsom initially sought. Key elements of his proposal, such as preventing insurers from recouping losses from utilities that cause fires and limiting payouts for some wildfire survivors' emotional distress, were excluded. The final bill does include measures to block hedge funds from profiting off wildfires and to prevent utility CEOs from receiving bonuses after their companies ignite blazes, as well as aiming to expedite payments to fire survivors.
Newsom, who has been working on the issue since the beginning of his tenure, viewed the overhaul as critical to preventing future utility bankruptcies and ensuring victims receive adequate compensation. However, the broad scope of his plan, which included proposals to limit subrogation and cap damages, proved politically challenging. Wildfire survivors also voiced opposition, labeling parts of the proposal a "utility bailout."
Negotiations involved intense lobbying and marathon sessions, with legislative houses proposing their own, more limited, plans. A focal point was subrogation, the insurance industry's ability to sue utilities for recoupment. Newsom's office made concessions, including a proposal to phase out subrogation and eventually cap it at 20 cents on the dollar, but lawmakers did not agree to the governor's original vision.
The compromise bill was put into an urgency measure, meaning it will require a two-thirds majority to pass the Legislature. Power company CEOs had warned of financial peril if a favorable outcome was not reached, and their stock prices reportedly dropped as the chances of a broad deal diminished.