California governor abandons plan to shift wildfire costs to insurers after protests

Governor Gavin Newsom reached a late-night deal with California legislators that abandons a proposal to shift more of the cost of utility-sparked wildfires onto property insurers, a move that critics said would have sharply raised premiums. The agreement also backs away from a plan that would have reduced the compensation available to fire victims and transferred additional costs to local governments.

The revised legislation, introduced by amending Senate Bill 492, limits certain attorney fees for insurers and bars hedge funds and private-equity firms from profiting on wildfire claims. It also creates a state program to accelerate payments to wildfire victims. Newsom said the changes represent “real progress for future fire survivors” but called for “full structural reform” and urged lawmakers to continue work on the Wildfire Fund, electricity rate stability, and protecting victims from unsecured creditor status.

The bill was finalized less than three days before the legislative session’s scheduled end, prompting an extension of the session to meet a voter-approved requirement that bills be printed at least 72 hours before a vote. Survivors of the 2023 Eaton fire and advocacy groups had protested the original plan, chanting “Who should pay? Shareholders should pay!” and urging legislators to prioritize victims.

Utility companies, including Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric, had lobbied for stronger liability protections after the Eaton fire, which killed 19 people and destroyed thousands of homes. The fire was attributed to an out-of-service transmission line owned by Edison. While more than 11,000 households have sued the utility, the companies deny negligence.

The new law also bars executives of the three utilities from receiving short-term bonuses after a fire that damages 500 or more structures, aiming to strengthen accountability. The legislation applies only to the three for-profit utilities that have been linked to at least seven of California’s 20 most destructive fires.