Places such as Irvine, California, and other western states see higher damages from wildfires. As of 2020, the western states experienced over $1 billion worth of damage from wildfires. Utility contractors who work in wildfire-prone areas often find it difficult to get liability insurance.
Inverse condemnation
Every state has a form of inverse condemnation, but California is the only state to apply it to wildfires caused by utility facilities. If the utility facility causes a wildfire, they are liable for the property damage even without negligence. These laws affect the ability of contractors to do their job. California puts all blame on the utility company, which then blames the contractors working in the area. The contractors will owe material defense costs regardless of fault.
Liability insurance for a wildfire
In regard to a wildfire, inverse condemnation leaves out negligence. A contractor working in a high-risk wildfire area can end up in court even without fault. Insurance companies are deciding not to offer wildfire coverage in high-risk areas. Under the law, insurance companies would have to pay out almost every time. If the wildfire utility laws spread to other states, the lack of interest to cover wildfire risks will grow. Some of the biggest insurance companies are excluding wildfire coverage.
Changing landscape
With the state holding utility companies accountable for all wildfires related to their buildings, the insurance companies are less willing to offer coverage to utility contractors. Where there was $100 million of excess liability coverage three years ago, there’s only $5 million of coverage now. The rest of the property damage and court fees are on the utility company and contractors. Insurance companies that offer wildfire coverage want better risk management protocols in place. Priority protocols include vegetation management, high wind with dry air temperatures and proof that current work won’t cause a wildfire.
There is protection from wildfires, but utility companies need to create protocols for the insurance companies and the safety of everyone in the area. A contractor should check for wildfire insurance in their contract before working in a high-risk area.