{"id":905536,"date":"2026-04-07T16:40:32","date_gmt":"2026-04-07T22:40:32","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=905536"},"modified":"2026-04-07T16:40:36","modified_gmt":"2026-04-07T22:40:36","slug":"wildfire-liability-limitations-for-utilities","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/wildfire-liability-limitations-for-utilities\/","title":{"rendered":"The Fires Next Time: State Wildfire Liability Limitations for Utilities"},"content":{"rendered":"\n

Thomas Dawson | McDermott Will & Schulte<\/a><\/p>\n\n\n\n

Following the wildfires of recent years, many states west of the Mississippi River have considered (and multiple states have now adopted) legislation to limit the liability of utilities for bodily injury and property damage caused by wildfires<\/a> that might have been ignited by utility-owned equipment. Most commonly, legislation requires (or permits) utilities to prepare and update wildfire mitigation plans that are elaborate and subject to some degree of state oversight. When such plans have been approved by a state department or agency and a utility is in substantial compliance with an approved plan, the extent of the liability shields varies. Some state frameworks include caps on awards, bar punitive or exemplary damage awards, and\/or establish specific statute of limitation periods ranging from one to four years. But in states with limitations on utilities\u2019 liability for wildfire damages, the net result for property insurers (and those that have purchased subrogation claims from property insurers) is to reduce or eliminate subrogation possibilities against utilities.<\/p>\n\n\n\n

In Depth<\/h4>\n\n\n\n
\n\n\n\n

In Oregon, a state currently without legislation to limit liability for wildfire damages caused by a utility\u2019s equipment or operations, the local electric utility has just agreed to pay the US government $575 million to reimburse firefighting costs and damages to nearly 300,000 acres of federal land and continues to defend against many suits brought by property owners following devastating fires in 2020 and 2022. So far, news reports indicate that total liabilities assessed in these cases now exceed $1 billion, with many more suits to establish damages set to continue in the coming months.<\/p>\n\n\n\n

California, the first state to set up a wildfire liability framework after devastating wildfires in 2017 and 2018 and Pacific Gas and Electric Company\u2019s bankruptcy filing in early 2019, has a unique approach to wildfire liability limitations for utilities. In 2019, the state established a wildfire fund, funded by the state\u2019s utility companies and by utility ratepayers.\u00a0According to the wildfire fund\u2019s website<\/a>, the fund can be tapped by a utility when covered wildfire damages exceed an annual aggregate retention amount of $1 billion.<\/p>\n\n\n\n

Other states have not followed suit with their own state funds, although Nevada and Utah have considered \u201cself-insurance\u201d funds. Even California\u2019s construct may not persist unchanged, with significant implications for utilities and insurers. Legislation enacted last year (Senate Bill (SB) 254, signed into law by Governor Gavin Newsom in September 2025) calls for \u201ca comprehensive assessment [of the state\u2019s \u2018emerging climate-fueled economic crisis\u2019] to analyze and develop long-term reforms that protect access to insurance, reduce litigation costs, provide fair and expeditious compensation to claimants, support wildfire mitigation, safety, and community resilience, and ensure large electrical corporations are accountable for safety and also have the financial health to attract low-cost capital on behalf of ratepayers.\u201d<\/p>\n\n\n\n

For re\/insurers in particular, it is worth noting two of the several specific topics that must be addressed in the assessment: subrogation and the California Wildfire Fund. As to subrogation and related matters, the legislation calls for:<\/p>\n\n\n\n

An analysis of the potential benefits and potential negative impacts on homeowners related to reasonable limitations on changes to recoveries in wildfire litigation arising from ignitions caused by electrical or gas utility infrastructure, including, but not limited to, restrictions on the recovery of attorney\u2019s fees, limitations on economic and noneconomic damages, including claims by insurers, limitations on public entity claims, limitations on claims by those outside the fire perimeter, and aggregate limitations on liability per event.<\/p>\n\n\n\n

As to the wildfire fund, SB 254 requires:<\/p>\n\n\n\n

Options for new models to complement or replace the fund, such as state-supported property insurance, or reinsurance, or both insurance and reinsurance, for wildfires and potential catastrophic natural disasters; a mutual wildfire insurance fund; a publicly supported financial safety net to enhance long-term resilience and utility and insurance rate affordability; and improvements to the fund to enhance its durability.<\/p>\n\n\n\n

As to the former, Section 47 of SB 254 includes language that, as to subrogation claims against electric utilities whose equipment or operations may have been responsible for the ignition of a wildfire damaging more than 1,000 structures, would require the insurer (expressly including surplus lines insurers) or reinsurer involved and the assignee of the insurer\u2019s claimed subrogation (typically a hedge fund or other investor) to give the electric utility a right of first refusal to settle the proposed subrogation claim directly with the re\/insurer. The electric utility would have 30 days to accept or reject the proposed subrogation offer. The offer itself and \u201cother documentation\u201d related to the offer would be confidential.<\/p>\n\n\n\n

As to the wildfire fund, note the possibility that the state might opt to become directly involved as an insurer or reinsurer in bearing wildfire-related financial risk.<\/p>\n\n\n\n

The comprehensive assessment is due no later than April 1, 2026.<\/p>\n\n\n\n

The status in other states<\/h4>\n\n\n\n

While most state legislation addressing utility responsibility for wildfires caused by their operations or equipment requires utilities (i.e.<\/em>, electric utilities) to submit wildfire mitigation plans, not all states mandate submission of such plans. Definitional issues around \u201cutilities\u201d could be significant. Are gas utilities included? (See<\/em> the 2010 gas pipeline explosion and fire in San Bruno, California.) Are battery energy storage systems included if not owned\/operated by a \u201cutility\u201d? (See<\/em> the 2025 Moss Landing, California, incident.) Neither New Mexico, North Dakota, nor South Dakota require utilities to file plans. State oversight of filed plans varies. And while Washington state requires filing of plans there are no liability limitation standards for those utilities that submit such plans.<\/p>\n\n\n\n

To date, only California has established and funded a wildfire fund. Other states have not followed suit, although Nevada and Utah have considered self-insurance funds. Hawaii\u2019s Public Utilities Commission may revisit whether to establish a fund when it next considers Hawaiian Electric\u2019s wildfire mitigation plan covering 2028 \u2013 2029. Some states (e.g.<\/em>, Texas) specifically authorize utilities to self-insure or purchase coverage from commercial insurers.<\/p>\n\n\n\n

Utah\u2019s Wildland Fire Planning and Cost Recovery Act (House Bill (HB) 66, adopted in 2020) has been copied to varying degrees in several other states. In Utah, in exchange for developing and obtaining approval for a wildland fire protection plan every three years (some states require more frequent updates), state utilities are shielded from liability; i.e.<\/em>, they are \u201cnot negligent\u201d if the utility\u2019s plan \u201caddresses the cause of the wildland fire for fire mitigation purposes\u201d and the utility has in fact \u201ccompleted the fire mitigation work identified in\u2026.[its] plan\u2026.\u201d Property damage awards are limited to the lesser of (i) cost to restore to pre-fire condition or (ii) the difference between pre-fire and post-fire fair market value.<\/p>\n\n\n\n

Laws in multiple states (e.g.<\/em>, Idaho, Montana, New Mexico, North Dakota, South Dakota, and Wyoming) incorporate \u201crebuttable presumptions\u201d or equivalent \u201cdeemer\u201d standards (e.g.<\/em>, in Arizona) that utility conduct in conformity with filed and approved mitigation plans is not negligent. But, in theory, this standard also allows claimants to show that the utility was, in fact, negligent in accordance with common-law standards. In Texas, a utility that has filed a mitigation plan, obtained approval for it, and demonstrates to a court that it has complied with the plan \u201cwith respect to the specific equipment found to have ignited or propagated the wildfire\u201d is shielded from liability. Kansas requires proof by \u201ca preponderance of evidence\u201d before a utility can be held liable for wildfire damages.<\/p>\n\n\n\n

Some of the wildfire liability legislation also prohibits awards of punitive damages or consequential property damage (e.g.<\/em>, Arizona) or limits punitive damage awards (e.g.<\/em>, Kansas, $5 million).<\/p>\n\n\n\n

2026 activity<\/h4>\n\n\n\n

South Dakota Governor Larry Rhoden just signed utility wildfire risk mitigation legislation (SB 36) into law on March 12, 2026.<\/p>\n\n\n\n

Oklahoma is currently considering legislation (HB 2989) that would permit (but not require) electric utilities to create wildfire mitigation plans and shield electric utilities from liability \u201c\u2026if in the absence of exceptional conditions, the electric utility\u2019s facilities and operations complied with the requirements of the National Electric Safety Code\u2026.\u201d We will know the fate of this legislation by the end of the 2026 legislative session, scheduled to adjourn May 29, 2026.<\/p>\n\n\n\n

In Kansas, the state\u2019s Corporation Commission must convene a workshop by July 31, 2026, to discuss and consider wildfire risks in general and utilities\u2019 wildfire risk reduction strategies and mitigation plans in particular.<\/p>\n\n\n\n

Conclusion<\/h4>\n\n\n\n

Property re\/insurers with books of business or property exposures in the western United States should be reevaluating and monitoring exposures and subrogation options in each of the states that have enacted liability limitations that have shifted responsibilities for wildfire damage. Those that have purchased subrogation claims from insurers that have paid or that are still paying wildfire damages claims in the past should also be parsing the new legal landscapes created by state legislatures and utility regulators.<\/p>\n\n\n\n

\n\n\n\n

When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 801.641.8304, or email experts@adviseandconsult.net<\/a>.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Thomas Dawson | McDermott Will & Schulte Following the wildfires of recent years, many states west of the Mississippi River have considered (and multiple states have now adopted) legislation to limit the liability of utilities for bodily injury and property damage caused by wildfires that might have been ignited by utility-owned equipment. Most commonly, legislation… Continue reading The Fires Next Time: State Wildfire Liability Limitations for Utilities<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[10721,9721,10885],"tags":[9895,22,56,9943],"class_list":["post-905536","post","type-post","status-publish","format-standard","hentry","category-insurance","category-property-damage","category-property-insurance-claims","tag-advise-consult","tag-insurance","tag-property-damage","tag-wildfires","entry"],"jetpack_publicize_connections":[],"yoast_head":"\nThe Fires Next Time: State Wildfire Liability Limitations for Utilities - 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