Inverse Condemnation in California Wildfire Cases

Inverse condemnation is the reason most California wildfires caused by utility equipment end up in court, and it is often misdescribed as automatic liability. It is not. This page explains what the doctrine is, how California courts came to apply it to utilities, how the California Supreme Court narrowed it in 2019, and who decides whether customers end up paying. Every rule below links to the court decision or statute it comes from. It is general education, not legal advice.

Where it comes from: the California Constitution

Eminent domain is the government's power to take private property for public use, paying the owner. California's Constitution goes further than taking. Article I, section 19 says: "Private property may be taken or damaged for a public use and only when just compensation, ascertained by a jury unless waived, has first been paid to, or into court for, the owner." (California Constitution, art. I, sec. 19)

The words "or damaged" are what matter for fires. When a public improvement damages property and nobody has paid for that, the owner can bring the claim, which is why it is called inverse condemnation: the owner starts the case instead of the government. The idea underneath is that the cost of something built for the public should not fall on the few owners it happens to harm.

How it came to cover utilities, including private ones

A city or a public utility district is plainly a public entity. The larger question was whether an investor-owned company such as Southern California Edison could be treated the same way. In Barham v. Southern California Edison Co. (1999), a case over the Mill Creek fire of October 27, 1993, the Court of Appeal held that it could: "SCE may be liable in inverse condemnation as a public entity." The court reasoned that the constitutional clause has as its principal focus "the concept of public use, as opposed to the nature of the entity appropriating the property," and that transmitting electrical power is a public use.

Government utilities were already covered. In Marshall v. Department of Water & Power (1990), the Court of Appeal affirmed an inverse condemnation judgment against the Los Angeles Department of Water and Power over the 1981 Chatsworth fire. And in Pacific Bell Telephone Co. v. Southern California Edison Co. (2012), which was not a wildfire case (a ground fault burned underground telephone cables), the court followed Barham, held that Edison may be liable for inverse condemnation, and applied a strict liability standard.

The 2019 change: not automatic

For years the doctrine was summarized as strict liability, meaning no need to prove negligence. In City of Oroville v. Superior Court (2019), a sewer case rather than a fire, the California Supreme Court set out the test more precisely: "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." It added that public entities "are not strictly or otherwise automatically liable for any conceivable damage bearing some kind of connection, however remote, to a public improvement," and that the inherent risk can come from maintenance and upkeep, not only from design.

Two things therefore have to be shown: an inherent risk of the improvement as designed, built or maintained, and that this risk substantially caused the damage. Negligence still does not have to be proven, but liability is no longer a matter of tracing a fire to a utility's equipment and stopping there.

After Oroville, in a wildfire case

In Simple Avo Paradise Ranch, LLC v. Southern California Edison Co. (2024), arising from the 2017 Thomas Fire, Edison argued that inverse condemnation should not apply to it. The Court of Appeal declined "to depart from the well-reasoned and long-standing holdings of Barham and Pacific Bell," applied the Oroville test, and held that the plaintiffs' complaint adequately alleged that an inherent risk of Edison's electric distribution system substantially caused the damage. That was a ruling on the pleadings, which means the court accepted the allegations as true for the purpose of deciding whether the case could go forward. It did not find the facts. See our Thomas Fire record.

Who pays is a separate question

Inverse condemnation decides whether a utility owes compensation to people whose property was damaged. Whether the utility can pass that cost to its customers is decided by the California Public Utilities Commission, under a different standard. In Decision 17-11-033 (2017), the Commission found that San Diego Gas & Electric "did not reasonably manage and operate its facilities" before the 2007 Southern California wildfires and denied it recovery of those costs. It rejected the argument that inverse condemnation required approval regardless of prudence: "Inverse Condemnation principles are not relevant to a Commission reasonableness review under the prudent manager standard."

The Legislature then changed that review. Assembly Bill 1054, signed July 12, 2019, found that utilities' wildfire liability exposure "has created increased costs to ratepayers." It added Public Utilities Code section 451.1, under which costs from a covered wildfire are just and reasonable if the utility's conduct "was consistent with actions that a reasonable utility would have undertaken in good faith under similar circumstances," and which states: "This section shall not affect any civil action, appeal, or other action or proceeding." It also created the Wildfire Fund (section 3284) to pay eligible claims from covered wildfires, with utilities' contributions not recoverable from their customers under section 3292, except Golden State Energy.

The practical result is two tracks. The doctrine that governs what a person harmed by a fire can recover was left in place, and the rules for who ultimately bears the cost were changed.

Where it shows up in our records

PG&E reported to the SEC that on June 22, 2017 the Sacramento County Superior Court found that inverse condemnation applied to it for the 2015 Butte Fire, and that on December 3, 2019 the federal bankruptcy court held that the doctrine applies to California's investor-owned utilities (PG&E Form 10-K for 2019). See the Butte Fire record. Lawsuits over the Woolsey Fire and many other utility fires in our database list inverse condemnation among their claims.

What the doctrine does not decide on its own

Even where inverse condemnation applies, key questions remain factual: Did a utility's equipment cause the specific fire? Did an inherent risk of that equipment, as designed, built or maintained, substantially cause the damage? Was the property within the affected area, and what is the extent of the loss? Those questions are resolved through investigation and, where disputed, through the courts, not by any website. We cover how cause is studied in who is responsible for a wildfire.

One theory among several

Inverse condemnation rarely stands alone. Utility wildfire cases also raise theories such as negligence, nuisance and trespass, which we mention in can I sue after a wildfire. To see how California wildfire cases generally move from investigation to resolution, read how wildfire lawsuits work, or review fires with litigation in the public record.

Common questions

Sources

• California Constitution, article I, section 19, California Legislative Information
• Barham v. Southern California Edison Co. (1999) 74 Cal.App.4th 744
• Marshall v. Department of Water & Power (1990) 219 Cal.App.3d 1124
• Pacific Bell Telephone Co. v. Southern California Edison Co. (2012) 208 Cal.App.4th 1400
• City of Oroville v. Superior Court (2019) 7 Cal.5th 1091
• Simple Avo Paradise Ranch, LLC v. Southern California Edison Co. (2024) 102 Cal.App.5th 281
• California Public Utilities Commission, Decision 17-11-033 (2017)
• Assembly Bill 1054 (2019), and Public Utilities Code sections 451.1, 3284 and 3292
• PG&E Corporation Form 10-K for fiscal year 2019

Sources read October 2, 2026.