Insurance industry representatives are raising concerns over proposed legislation in Arizona that would limit the liability of utility companies for wildfire-related damages and mandate the creation of risk mitigation plans by power providers.
The proposed bill would require utilities to develop plans identifying areas with heightened wildfire risks, outlining de-energization protocols, managing vegetation, and implementing other fire prevention measures.
Additionally, the bill would establish a higher burden of proof for wildfire-related lawsuits against utilities, requiring claims to be supported by clear and convincing evidence.
Any legal action would be restricted to damages directly caused by a wildfire, excluding claims for consequential property damage, punitive damages, or bodily injury.
Under the proposed legislation, utilities that adhere to their risk mitigation plans would be considered to have met a standard of care and would not be held responsible for wildfires caused by factors outside their control or right-of-way.
Arizona has experienced a notable increase in wildfire activity in recent years, prompting discussions about insurance coverage and legal challenges for utility companies.
Data from the Arizona Department of Forestry and Fire Management indicates a fluctuating yet concerning trend in occurrences. In 2023, the state recorded 1,659 wildfires that led to 176,939 acres being burned.
The proposal comes as parts of Arizona’s rural insurance market are already under pressure, according to Marcus Osborn, a contract lobbyist and senior director of government relations with Kutak Rock LLP.
Osborn said that the legislation could add strain to an already challenged market, noting concerns over the potential for utility-caused wildfires in Arizona. He said broad liability protections for utilities could create significant issues.
In certain regions, regulatory frameworks limit insurers' ability to adjust premiums to reflect the heightened risks associated with wildfires.
For example, California's Proposition 103 restricts rate increases, making it challenging for insurers to maintain profitability amid escalating risks. This has led some insurers to seek substantial rate hikes or withdraw from high-risk markets altogether.
Osborn also noted that if utilities are shielded from liability, home insurance carriers may need to adjust premiums to account for increased risk exposure.
He expressed skepticism over whether the required risk mitigation plans would lead to increased safety, while also pointing to concerns over the scope of liability immunity granted to utilities.
What are your thoughts on this story? Please feel free to share your comments below.
