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California lawmakers preserve insurer subrogation, avoiding a 10% to 20% premium hit
SB 492 keeps insurers able to seek wildfire cost recovery from utilities, but caps attorney fees at 10% and limits sales of subrogation claims to private equity and hedge funds.
California lawmakers rejected a proposal that would have removed insurers' subrogation rights for wildfire-related litigation, a change insurers said could have added 10% to 20% to statewide homeowners' premiums, according to Insurance Business.
SB 492 was published in amended form on August 29 after a gut-and-amend process, with the bill replacing an unrelated youth-housing bond measure. Authored by Senator Josh Becker and Assemblymember Cottie Petrie-Norris, the final text shelved Gov. Gavin Newsom's push to eliminate subrogation, while still leaving the broader liability question unresolved.
Subrogation allows insurers to sue utilities to recover claim payouts, and California's inverse condemnation doctrine can make utilities liable for wildfire damage even without negligence. Insurance Business reports that the American Property Casualty Insurance Association, citing governor’s office analysis but not publishing its methodology, estimated premium increases if subrogation were removed.
While subrogation rights remain, the amended bill adds limits: attorney fees are capped at 10% of final settlements, insurers are barred from selling subrogation claims to private equity firms or hedge funds, and law firms face restrictions on unsolicited contact with survivors for 30 days after a disaster. The legislation also creates a California Wildfire Relief Fast-Pay program, requiring valid claims to be determined within 60 days and settlement offers to follow within 30 days, with survivors retaining the right to pursue utilities in court subject to a limited stay during Fast-Pay.
INSURANCE BUSINESS further notes that APCIA welcomed the outcome as protecting Californians and preserving affordability and availability of coverage, with Denni Ritter, vice president of state government relations at APCIA, saying the result keeps costs with parties responsible for wildfires and supports efforts to stabilize the state’s insurance market.