By admin 
Gov. Gavin Newsom’s last ditch effort to pressure legislators to change the way the state handles utility-caused wildfires involves an array of measures. But one issue in particular has become a flashpoint in the ongoing negotiations: Whether insurance companies should be able to recoup money from a utility company after a fire.
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Newsom’s idea that insurance companies should not be able to recoup the money they pay out in claims after fires has drawn the most pushback from state lawmakers, who do not appear as far apart from the governor on other parts of the policy package under consideration, such as creating further accountability measures for utility companies and their CEOs.
So far, all negotiations over the idea, which insurance industry representatives say could have far-reaching consequences for California homeowners by bringing unknown consequences to the home insurance market, remain largely behind closed doors and there is no public bill language for advocates and journalists to parse. The Legislature is supposed to pass bills before Sept. 1 for them to be considered by Newsom.
Leaders of both the Senate and Assembly have indicated they’re averse to going along with the governor’s desire to eliminate the recuperation process, which is called subrogation. Assembly lawmakers involved in negotiations however indicated this week that Newsom has continued to press for eliminating subrogation, and suggested a willingness to potentially compromise on the issue.
The governor’s latest proposal involves a slow wind down of subrogation over as long as six years, according to Assemblymember Cottie Petrie-Norris, D-Irvine, a lead lawmaker in the negotiations. The legislation would include “speed bumps” where the state could stop and evaluate how the insurance market was handling the loss of subrogation.
“It would be implemented over a number of years and include evaluation points to make sure that the market’s stable and that there haven’t been huge spikes in premiums,” she said. Newsom proposed the slow rollout in response to lawmaker concerns that he was pushing too big a change without a firm grasp on potentially far-reaching consequences for the state’s insurance markets, she said.
“Our goal really is to ensure that we’re landing on something that number one ensures that survivors can rebuild and recover, and number two is a good deal for California families,” she said.
Newsom, during a press conference Wednesday, said he did not want to give up on his desire to end subrogation. While critics of his position have accused him of trying to jam a utility company bailout through at the end of the session, Newsom cast the lawmakers disagreeing with him as aligned with another industry unpopular with many Californians.
“I mean, if you’re with the insurance companies, and you think they should be paid before victims, OK,” he said, in response to a question about the Senate’s plan, which would allow insurance companies to continue the practice. “That’s a point of view. I’m not going to defend that.”
The process can be particularly lucrative to companies. Pacific Gas and Electric Co. paid $11 billion in claims to insurance companies from wildfires in 2017 and 2018, including the Camp Fire that decimated most of Paradise, while it was in the midst of a bankruptcy case.
Newsom said the insurance industry is “going to do everything to make sure they get paid first,” to make sure they “get theirs” through “subrogation games.”
Those comments came the same day that 15 insurance company CEOs wrote a joint letter to Newsom and legislative leaders that said taking away or reducing the ability to recover losses would inevitably mean price increases.
“Those higher costs fall first on homeowners and businesses in high-fire-risk areas, who already pay the highest premiums in the State,” the CEOs wrote.
The executives said the state’s troubled insurance market, which has been battered in recent years by inflation, catastrophic fires and rising risks due to climate change, is improving because of regulatory changes pushed in recent years by Insurance Commissioner Ricardo Lara.
“Do not reverse that response by shifting utility-caused losses onto policyholders,” the letter said.
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Newsom is not alone in his stance, including from people who are not traditionally aligned with utility companies.
Mark Toney, executive director of The Utility Reform Network, an organization that works to protect ratepayers from increased electrical rates, backs the idea of eliminating the ability of insurance companies to recoup money. He sees it as a way to help sustain a state wildfire fund and prevent taxpayers from being asked to keep refilling it.
“We want the funds to be directed to the wildfire survivors and get rid of the cut taken by insurance companies,” he said.
But Sen. Ben Allen, D-Santa Monica, who chairs the Senate Energy, Utilities and Communications Committee and is also running for insurance commissioner, worries that eliminating subrogation is akin to squeezing a balloon — it may help solve a challenge for utility companies but create a challenge in another area by exacerbating the state’s insurance market.
“It’s not about us supporting insurance companies, it’s about making sure that entities that cause disasters are held accountable,” he said. “My only interest in protecting the market is trying to make sure that real Californians have real options for insurance.”
Alignment on curtailing CEO bonuses
On other elements of the likely package, Newsom and lawmakers appear to be coming together. In his latest proposal, according to an outline a spokesperson provided to The Sacramento Bee on Wednesday, Newsom had moved away from language in which he sought to curtail utility CEO bonuses only when the companies start fires that result in a fatality. Many megafires have not killed people even as they’ve devastated communities.
The governor’s previous proposal had also tied the loss of bonuses to a finding by state regulators that a utility acted imprudently in its maintenance and wildfire mitigation protocols ahead of the fire’s start. A prudency standard already exists for the companies in state law, but since changes Newsom drove through the Legislature in 2019, state regulators have only rarely found utility companies to have acted imprudently, even when their equipment touches off catastrophic wildfires.
Newsom’s earlier stance led some advocates to believe the penalties to bonuses were unlikely to be enforced even after the more destructive utility-caused wildfires.
But Newsom’s new language moves away from the prudent standard and also drops the fatality requirement. Instead, the governor would see a CEO lose their bonus after any fire that does more than $1 billion in damages, according to the outline, which did not provide further details into the penalty’s enforceability.
Both Assembly and Senate leaders have indicated they also want to penalize the CEOs for wildfires, offering different variations on the idea. Some Assembly lawmakers want to cut the bonuses for two years, and both Senate and Assembly negotiators have proposed expanding the penalties to cover bonuses awarded to other executives.
Negotiations over those details are likely to conclude easier if the different groups can reach agreement over insurance subrogation, as the session barrels into its final weekend.
“Wildfires aren’t just an abstract policy phenomenon for us to talk about,” Assemblymember Isaac Bryan, D-Jefferson Park, said during a rally of Eaton Fire survivors on Tuesday morning.
“There are folks who have lost their lives who aren’t here to speak today about how they wish the system worked differently,” he said. “And those are the folks we have to keep front and center in these conversations, and that is exactly what I plan to do… and what a number of our colleagues in both the Senate and the Assembly plan to do. And I believe that is ultimately the heart of what the governor would like to do.”
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This story was originally published August 27, 2026 at 1:55 PM.