California Wildfire Liability Bill Dies After Lawmakers Reject Newsom Limits on Victim Payouts

California lawmakers ended the legislative session Tuesday without voting on a major wildfire liability bill after rejecting Gov. Gavin Newsom’s push to reduce what electric utilities could owe wildfire victims, insurers and local governments when their equipment sparks catastrophic fires.

The Assembly declined to take up Senate Bill 492 on Sept. 1, effectively killing a last-minute compromise that would have created a faster claims process for wildfire survivors while preserving their ability to sue utilities for additional damages.

The final bill did not include the broader liability protections Newsom and California’s major investor-owned utilities had sought. Assembly Speaker Robert Rivas said the proposal did not provide enough relief, accountability or meaningful reform to move forward.

SB 492 would have created the California Wildfire Relief Fast-Pay Program for people with claims stemming from qualifying utility-caused fires. The program included deadlines for determining whether claims were eligible and making settlement offers, giving survivors an alternative to waiting years for litigation to conclude.

Survivors would have retained the option to pursue lawsuits rather than accept settlements through the program. The bill also would have barred private equity groups from buying wildfire claims, imposed restrictions on some attorney fees involving insurer recovery claims and strengthened consequences for utility executive compensation after certain catastrophic fires.

The proposal emerged after lawmakers rejected key parts of Newsom’s original wildfire plan.

The governor had sought to reduce some payments utilities could face after causing fires, including compensation available to survivors for pain and suffering, reimbursements sought by insurance companies and money recovered by local governments for damaged infrastructure.

Newsom backed away from most of those provisions after resistance from lawmakers, wildfire survivors, consumer advocates and insurers, producing the narrower SB 492 compromise in the final days of the session.

The fight has taken on greater urgency since the January 2025 Eaton Fire in Los Angeles County.

Following an 18-month investigation, the Los Angeles County Fire Department and CAL FIRE concluded that electrical arcing on an out-of-service Southern California Edison transmission line caused the fire. The blaze killed 19 people and destroyed thousands of homes in Altadena.

More than 11,000 households have sued Southern California Edison over their losses. The utility has denied allegations that it was negligent while acknowledging its equipment was likely associated with the fire’s ignition and establishing a program to resolve claims.

The scale of those losses has renewed a long-running debate over California’s rules for utility-caused wildfires.

Under the state’s doctrine of inverse condemnation, a utility can face liability for property damage when its electrical infrastructure substantially causes a fire even if a property owner cannot prove ordinary negligence. That gives wildfire victims another path to compensation beyond claims based on allegations that a utility failed to act reasonably.

Insurance companies can also seek reimbursement after paying their own policyholders. Known as subrogation, the process allows an insurer that covered a wildfire loss to pursue the utility responsible for that damage. Newsom’s original proposal sought to reduce those recoveries, while the final SB 492 preserved insurers’ ability to pursue them.

Utilities and the governor have argued that the current system can expose power companies to enormous financial losses after a catastrophic fire, raising borrowing costs, threatening investment and potentially putting additional pressure on electricity rates.

California created a roughly $21 billion Wildfire Fund in 2019 following years of destructive fires and PG&E’s bankruptcy. Funded through contributions from utilities and their customers, it provides participating utilities with money to pay eligible wildfire claims.

Lawmakers expanded that framework in 2025 by creating a continuation account with as much as another $18 billion in potential claim-paying capacity for future fires. State officials have nevertheless warned that another series of major disasters could strain the system.

Those concerns spilled into financial markets during the final days of negotiations. Shares of Edison International and PG&E fell after investors learned the compromise would not include broader liability protections, then rebounded after SB 492 died.

Newsom said Tuesday that the final proposal did not address what he considers the underlying structural problems in California’s wildfire system and indicated that he intends to continue pursuing changes.

Some lawmakers representing communities affected by the 2025 Los Angeles fires expressed disappointment that the compromise never received a vote. Assembly leaders said they plan to hold hearings this fall as they continue working on wildfire policy.

Until lawmakers adopt another proposal, California’s existing rules remain in place, including wildfire survivors’ ability to pursue utility claims and insurers’ ability to seek reimbursement after paying covered losses.