Insurance executives warn Newsom plan to shift utility wildfire liability would raise premiums

Insurance company executives warned Gov. Gavin Newsom in a letter Wednesday that his plan to shift utility wildfire liability to property insurers would raise premiums across California.

“The party whose equipment ignites a catastrophic fire should bear the economic consequence of that fire,” the 15 executives wrote. “Shifting those costs to policyholders does not reduce the cost of electricity but does make homeownership more expensive and insurance coverage harder to find.”

As the legislative session nears its end, Newsom’s staff and lawmakers have been negotiating behind closed doors on a deal to limit utilities’ wildfire liabilities.

According to a confidential document that Newsom’s staff sent to lawmakers and was obtained by Politico, the governor wants to stop property insurers from recouping their losses from homes destroyed in utility-sparked wildfires.

That could increase homeowners’ property insurance rates by as much as 50%, according to the Personal Insurance Federation of California. The highest hikes would be for those families living in severe fire risk areas.

“The proposal would shift billions of dollars in wildfire costs away from utilities and onto insurance consumers across the state, making coverage more expensive and harder to find,” said Denni Ritter at the American Property Casualty Insurance Assn.

Southern California Edison and the state’s two other big for-profit utilities have been lobbying Newsom and lawmakers to further shield them and their shareholders from wildfire liabilities ever since last year’s Eaton fire caused the price of their stock to tumble.

Government fire investigators said the fire, which killed 19 people and destroyed thousands of homes, was caused by electrical arcing on Edison’s out-of-service transmission line in Eaton Canyon. Edison kept the line in place despite not using it since 1971.

More than 11,000 households have filed suit against the utility, claiming it acted negligently, which the company denies.

Edison is offering settlements to victims of the Eaton fire. A $21-billion state wildfire fund that Newsom and lawmakers created in 2019 to protect the state’s three big utilities from bankruptcy after a fire is reimbursing Edison for its payments to victims.

At a press conference Wednesday, Newsom defended his plan, which also includes limiting the fees of attorneys in wildfire litigation and stopping hedge funds from profiting on the claims.

Newsom said that current law allows insurers to be paid before victims after a fire.

“The insurance industry is going to do everything to make sure they get paid first,” Newsom said.

No legislation has yet been filed to end what are called insurers’ subrogation claims. The legislative session ends Monday at midnight. The short time frame would allow for little public debate of a bill filed this week.

According to the document written by Newsom’s staff, the governor also proposed reducing amounts that local governments receive from utility-caused fires. The California State Assn. of Counties said that would shift costs to local taxpayers.

“Shifting wildfire costs to local governments is unjustified when utilities continue to generate significant profits and return billions to shareholders,” the association said in a brief recently sent to lawmakers.

Newsom also wants to reduce payments that fire victims can receive for non-economic damages including pain and suffering, angering victims of the Eaton fire.

More than 50 Eaton wildfire victims showed up to protest in front of the governor’s mansion on Monday night in Sacramento, where Newsom was holding an event for legislators.

They chanted, “Who should pay? Shareholders should pay!”