Clendaniel: Who should pay for California wildfire damages?

I had a college professor who gave a lecture on a topic I thought sure to be a snoozer — the history of economics. Instead, it was fascinating throughout.

I was intrigued.

“It’s always the stories,” he told me. “Find a good anecdote, tell it well and keep it simple. People will be interested in practically anything.”

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Which brings us to the topic of the day: inverse condemnation. A sleep-inducing topic if there ever was one.

But there’s a story to be told about how it became part of the state Constitution. And why it’s so important that Californians from Redding to San Diego need to understand how it works.

Billions of dollars are at stake. Utilities such as PG&E hate the state’s inverse condemnation laws, which hold them responsible for wildfire damages caused by their equipment — even if they’re not negligent. PG&E is raising bankruptcy fears. Gov. Jerry Brown and the Legislature are contemplating letting the company off the hook. They shouldn’t. There are better ways to address the issue.

The story of inverse condemnation begins in 1879,  or roughly 30 years after the Gold Rush and California’s admission to the union. San Jose was a rural, farming community of 18,060. Oakland was home to 48,682 residents, and San Francisco’s population had quadrupled from 58,000 in 1860 to 233,959 in less than 20 years, creating all of the rapid, out-of-control growth problems you would expect.

The Legislature had convened a Constitutional Convention in Sacramento to re-write the 1849 Constitution.

Article 1, Section 19 was the topic of the day. Thanks to the California State Archives and the 2016 research of UC Davis law student David Ligtenberg, we know that two of the delegates, John S. Hager and Samuel M. Wilson, got into it.

Wilson objected to the insertion of this sentence: “Private property may be taken or damaged for a public use and only when just compensation … has first been paid to … the owner.” He argued that the words “or damaged”  opened a new arena of liability with uncertain implications.

Hager disagreed.

His argument, Ligtenberg wrote, told the story of the government allowing San Francisco to cut a street “immediately adjacent to and between houses.” The construction project left houses on either side of the street in danger of sliding off newly made cliffs. Hager, a district judge for San Francisco from 1855-61, argued that the homeowners deserved compensation after their homes were damaged, even though “not a foot” of their property was taken.

The delegates eventually agreed with Hager, voting 62-28 to approve the wording.

Ever since, lawyers and the courts have been fighting over the interpretation of the language and the extent of government and public utilities’ responsibility for damages they cause.

Today, in the event of property damage from wildfires, if a utility is found to be negligent, its shareholders pay the damages. The inverse condemnation debate centers on what happens if the utility is not negligent but its actions nevertheless cause harm.

Currently, under inverse condemnation, the utility can pass on the cost of the damages to ratepayers. PG&E wants to do away with that liability, effectively pushing the cost of the damage elsewhere.

“Without inverse condemnation,” says Alejandro Camacho, an environmental law expert at the UC Irvine law school, “the people who are harmed by the activity are going to be left bearing the burden for the costs.”

Camacho doesn’t fault lawmakers for trying to address the wildfire responsibility issue. But he is critical of their narrow thinking.

“California needs to take a broader, more comprehensive approach to how it is deals with its wildfire problems,” he said.

That means taking a fresh look at how the state and utilities address fire prevention. It should include careful examination of PG&E’s performance and an independent analysis of its ability to absorb the costs of future damages. It calls for a fresh look at the separate issues of fire insurance and forest management in a state facing climate change. And perhaps it’s also time to reconsider allowing development in high-risk wildfire areas.

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As Sen. Kamala Harris tweeted Tuesday, “Since 2012, there hasn’t been a month in California without a wildfire burning. It didn’t use to be this way.”

As of Tuesday, 16 wildfires were burning in California. It seems a safe assumption that in the next few years a massive, deadly wildfire is likely to strike the Bay Area.

How — or even whether — victims are compensated for any damages caused by utilities’ equipment depends on how the concept of inverse condemnation is addressed. It may not be the sexiest topic before Californians. But I’ll be paying attention. You should, too.

Source: FS – All – Real Estate News 1
Clendaniel: Who should pay for California wildfire damages?