SACRAMENTO, CA — California Gov. Gavin Newsom is making a late-session push to change how the financial costs of utility-caused wildfires are distributed, opening a new debate over whether utilities, insurance companies or their customers could ultimately bear more of the burden.
The proposal comes as California continues confronting the enormous financial consequences of catastrophic wildfires and questions about the long-term stability of the state’s utility and insurance systems.
According to CalMatters, Newsom’s proposal includes potential changes to the ability of insurance companies to recover money from utilities after insurers pay claims resulting from utility-caused fires.
That process, known as subrogation, allows an insurer that has compensated a policyholder to pursue reimbursement from a party determined to be responsible for the loss.
CalMatters reported that Newsom is proposing to limit — or potentially eliminate — insurers’ ability to recover those payments from utilities in certain wildfire cases. Insurance industry representatives have warned that restricting subrogation could transfer additional costs to insurers and potentially contribute to higher premiums for California policyholders.
California Searches for a New Wildfire Cost Model
The debate follows years of efforts by state officials to determine how California should pay for increasingly expensive wildfire disasters while maintaining financially stable electric utilities.
California established its Wildfire Fund following legislation signed in 2019. The fund provides a mechanism for reimbursing eligible claims arising from wildfires caused by participating electric utilities.
The issue received renewed examination under Senate Bill 254.
A 2026 study prepared for the California Wildfire Fund examined several potential approaches for handling catastrophic wildfire liability.
Among the options examined were establishing a state-administered wildfire liability insurance program for electric utilities and creating a state financial backstop combined with utility self-insurance.
The report illustrates the broader problem facing California policymakers: catastrophic wildfires can produce losses large enough to affect homeowners, insurance carriers, utilities, investors and utility customers simultaneously.
Who Ultimately Pays?
The current debate largely centers on where those costs should fall.
Utilities face potentially enormous liabilities when their equipment is determined to have caused a wildfire. Insurance companies, meanwhile, may initially pay homeowners and businesses for covered losses before attempting to recover some of those costs from responsible parties.
Limiting that recovery could reduce utilities’ exposure to wildfire claims but leave insurers responsible for a larger portion of losses.
Supporters of utility liability reform have argued that California needs a system capable of preventing catastrophic wildfire liabilities from destabilizing electric utilities or dramatically increasing electricity costs.
Critics, including insurance industry representatives and some wildfire survivors and consumer advocates, have raised concerns that changing liability rules could shift costs elsewhere rather than eliminate them.
The disagreement therefore extends beyond utilities and insurance companies. Decisions made in Sacramento could eventually affect California residents through electricity rates, insurance premiums or changes in how wildfire victims pursue compensation.
Wildfire Liability Remains a Major California Policy Question
California has spent years attempting to balance wildfire victim compensation, utility stability, insurance availability and affordable energy.
The state’s Wildfire Fund already represents one major attempt to spread catastrophic wildfire risk rather than allowing individual disasters to threaten the financial stability of utilities.
Newsom’s latest proposal indicates that California’s system could undergo further changes as lawmakers reconsider who should ultimately carry the financial risk associated with increasingly destructive fires.
With the legislative session advancing, lawmakers will now have to determine whether changing utility liability rules creates a more sustainable wildfire financing system — or simply transfers billions of dollars in potential costs from one group of Californians to another.
Sources: CalMatters — “Newsom wildfire plan pits insurers against utilities” and California Wildfire Fund — Senate Bill 254 Study Report.