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Inverse condemnation makes utility companies liable for damages

On Behalf of | Dec 4, 2023 | Eminent Domain, Inverse Condemnation

Multiple wildfires that caused substantial damage to California towns have been connected to missteps by electric utilities. Property owners rightly want compensation for damages that would not have happened if utility companies had acted with greater care. The legal concept of inverse condemnation opens a path to the recovery of financial damages by private property owners.

Inverse condemnation’s relationship with eminent domain

The principle of inverse condemnation comes from the legal framework of eminent domain. Established by the U.S. Constitution and mirrored in California’s constitution, eminent domain requires public agencies or agents of the public good to pay landowners the fair market value for their properties when they must be seized for public projects, like roads or utility infrastructure. Eminent domain condemns the property and thereby forces its sale for the sake of the public good.

Inverse condemnation reflects the liability that public agencies take on as part of the right to force the sale of property for public purposes. If the operation of those public services damages private property, then the operator must compensate the owners. Courts have interpreted these condemnation laws to include private utility companies because they function for a public purpose.

Proving liability

Due to the widespread damages that can occur from a utility-caused wildfire, utility companies have an interest in fighting claims for damages. To maximize the recovery of damages, property owners who suffered losses will look for evidence that the utility failed to construct or maintain their infrastructure sufficiently to suppress the risk of harm.

In the event of unforeseen problems, a utility might remain liable for damages after any accident. If the company did not act in error, it has the ability to request a rate hike to cover the cost of damages.