Inverse Condemnation: Suing Utilities After a CA Wildfire

When a wildfire is caused by utility infrastructure — a downed power line, a malfunctioning transformer, inadequate vegetation clearance — an affected property owner may have a potential claim against the utility that goes beyond what the insurance policy pays. In California, one of the most powerful legal tools for wildfire victims is inverse condemnation: a cause of action grounded in the California Constitution that does not require proof of negligence, but does require proof that the damage was substantially caused by an inherent risk of the public improvement's deliberate design, construction, or maintenance.

This article describes how inverse condemnation works in California, how the California Supreme Court's decision in City of Oroville v. Superior Court (2019) shapes the causation requirement, how the doctrine differs from negligence, what damages may be recoverable, and why the claim matters even when insurance is in place.

What Is Inverse Condemnation?

The government (and entities operating public improvements, including investor-owned utilities under California law) has the power of eminent domain — the right to take private property for public use, with just compensation. A formal taking is condemnation.

Inverse condemnationis the reverse: the property owner sues the public entity (or, in California, an investor-owned utility) claiming that the entity's public improvement effectively damaged or destroyed private property without just compensation. The constitutional source is California Constitution, Article I, Section 19, which provides that private property may not be taken or damaged for public use without just compensation.

In the wildfire context, the theory is that the utility operates its electrical infrastructure for public benefit. When that infrastructure substantially causes a fire that destroys private property, the utility has effectively damaged that property for public use, and just compensation may be owed.

Strict Liability — With a Substantial-Cause / Inherent-Risk Requirement

Inverse condemnation in California is often described as a strict-liabilitycause of action, meaning the plaintiff does not have to prove the public entity or utility was negligent or violated a duty of care. Barham v. Southern California Edison Co.(1999) 74 Cal.App.4th 744 and Pacific Bell Tel. Co. v. Southern California Edison Co.(2012) 208 Cal.App.4th 1400 are the foundational authorities applying inverse condemnation to investor-owned utilities; the Court of Appeal reaffirmed the doctrine's continued application to IOUs in Simple Avo Paradise Ranch, LLC v. Southern California Edison Co.(2024).

California Supreme Court decisions tightening the causation requirement remain controlling. Under Holtz v. Superior Court (1970) 3 Cal.3d 296 and Belair v. Riverside County Flood Control District (1988) 47 Cal.3d 550, the damage must be substantially caused by the public improvement. The Court refined that standard in City of Oroville v. Superior Court (2019) 7 Cal.5th 1091, framing the holding this way:

What we hold is that the damage to private property must be substantially caused by an inherent risk presented by the deliberate design, construction, or maintenance of the public improvement.

Practically, a plaintiff in an inverse-condemnation wildfire case must show:

1. The defendant operates a public improvement (or, for an IOU, electrical infrastructure operating under the same doctrinal framework).
2. The damage to private property was substantially causedby that improvement, in the sense described above — an inherent risk of its deliberate design, construction, or maintenance.
3. The plaintiff suffered damage to private property.

Negligence is not an element. But after Oroville, a plaintiff can no longer rely on the bare fact that a public improvement was involved in the loss; the causal connection has to run to an inherent risk of how that improvement was deliberately designed, built, or maintained.

Inverse Condemnation vs. Negligence

Many wildfire lawsuits include both claims — inverse condemnation (strict liability for the infrastructure failure) and negligence (for failing to maintain equipment, clear vegetation, or de-energize during high-wind events). This maximizes available damages.

Which Utilities Can Be Sued?

• Investor-owned utilities (IOUs).Pacific Gas & Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E) are the three major IOUs in California. Under Barham, Pacific Bell, and Simple Avo Paradise Ranch, they operate electrical infrastructure as a public improvement and remain subject to inverse condemnation.
• Municipal and other public entities. Publicly-owned utilities (e.g., LADWP) and other public entities are subject to inverse condemnation under California Constitution Article I, Section 19. These are typically the cleaner inverse-condemnation defendants because the constitutional source is direct; IOU liability is the more contested doctrinal frontier and has been the subject of repeated industry challenges.
• Water districts and water-system failure theories.If a public entity's infrastructure substantially contributes to property damage — e.g., a failed water system that prevented fire suppression — an inverse-condemnation theory may apply, but the cases addressing water-system-failure theories in the wildfire context are unsettled and the public entity may raise governmental-immunity defenses.

What Damages Can You Recover?

The measure of damages in inverse condemnation is “just compensation” — the amount necessary to make the property owner whole. This can include:

• Cost to repair or rebuild the damaged property
• Diminution in property value (for damage that cannot be fully repaired)
• Loss of use (temporary housing, lost rental income)
• Personal property destroyed in the fire
• Business losses (lost income, extra expenses)
• Landscaping and trees

When combined with a negligence or other tort claim, additional damages may be available, including emotional distress and, in cases of qualifying conduct, punitive damages. Important distinction: Government Code § 818 bars punitive damages against public entities (e.g., LADWP, water districts) entirely. Punitive damages may be sought against private investor-owned utilities, although recovery in IOU wildfire cases is uncommon.

Recent California Wildfire Litigation

Inverse condemnation has been central to nearly every major California wildfire case in recent years:

• PG&E / Camp Fire (2018):PG&E was found responsible for the Camp Fire, which destroyed Paradise. The company filed for bankruptcy in January 2019, established a $13.5 billion Fire Victim Trust through its Plan of Reorganization, and pled guilty in Butte County Superior Court (June 16, 2020) to 84 counts of involuntary manslaughter and one felony count of unlawfully starting a fire (Pen. Code § 452). Inverse condemnation was a core theory.
• SCE / Thomas Fire, Woolsey Fire: Southern California Edison faced thousands of inverse condemnation and negligence claims from the 2017 Thomas Fire and 2018 Woolsey Fire.
• 2025 Eaton Fire (SCE): SCE has been named as the principal alleged ignition defendant in multiple complaints arising from the 2025 Eaton Fire, including actions by Los Angeles County and private plaintiffs.
• 2025 Palisades Fire (LADWP): Lawsuits against the Los Angeles Department of Water and Power focus principally on alleged water-system failure (including the Santa Ynez Reservoir and dry hydrants) rather than ignition. The alleged ignition cause has been described in some pleadings as arson/rekindling, not utility equipment.

How Inverse Condemnation Interacts With the Insurance Claim

The insurance claim and the inverse-condemnation/negligence claim against the utility are separate proceedings that typically run in parallel:

1. The insurance claim runs on its own clock. Insurance policies have deadlines that run independently of any utility litigation; most insureds cannot afford to wait on the utility case before opening the insurance claim.
2. The utility claim is typically attorney-driven.Inverse-condemnation litigation is complex and is typically handled by plaintiffs' firms on contingency. Many of those firms specialize in wildfire litigation.
3. Documentation does double duty. The documentation an insured builds for the insurance claim (damage photos, inventory, contractor estimates, ALE records) also supports the utility claim.
4. Damages do not double-count. Generally, the same damages cannot be recovered twice. If an insurer pays $500,000 for dwelling damage and the utility settlement also addresses dwelling damage, those amounts offset. But categories that insurance did not cover (the underinsurance gap, uncovered losses, emotional distress) are typically additive.

Does an Insured Need a Public Adjuster AND an Attorney?

Often, both roles end up involved. They handle different claims:

• A Public Adjuster handles the insurance claim— documenting the loss, negotiating with the insurer, and working to maximize policy recovery. This is a contract matter with the insurer.
• An attorney handles the utility claim— the inverse condemnation and negligence lawsuit against the entity whose infrastructure substantially caused the fire. This is a tort/constitutional matter.

Having both can help an insured pursue the maximum from the insurance policy andthe responsible party for damages beyond policy limits.

This article is for informational purposes only and does not constitute legal advice. Insurance policies and applicable law vary by state and by policy form. Consult with a licensed professional regarding your specific situation.

Written by Leland Coontz III, Licensed Public Adjuster, CA License #2B53445.