California lawmakers block Newsom’s push to stop insurers from suing utility companies that cause wildfires

California lawmakers have rejected Gov. Gavin Newsom’s push to stop insurance companies from seeking reimbursement from utility companies responsible for wildfires.

The proposal would have prevented insurers from going after investor-owned utilities to recover money they had paid to homeowners and businesses whose property was damaged or destroyed by the companies’ fires.

Newsom’s office pushed for the change as part of a wider effort to protect California’s wildfire liability fund and prevent utilities from potentially being driven to bankruptcy by the cost of another devastating blaze.

But Democratic lawmakers refused to support the plan after negotiations with the governor’s staff stretched from Thursday night into late Friday, four sources familiar with the talks told KCRA.

Newsom said the fight for broader changes will continue 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.”

Major insurance companies had warned the proposal could raise premiums and destabilize California’s insurance market.

The practice at the center of the dispute is known as subrogation. It allows insurers that have already paid wildfire victims’ claims to seek reimbursement from utility companies responsible for causing fires.

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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