A bill circulating in North Dakota would prevent courts from applying a strict liability standard to qualified utilities in wildfire-related lawsuits and allow a utility’s wildfire mitigation plan to serve as evidence of reasonable care, according to AM Best.
Senate Bill 2339 would prohibit courts from holding utilities strictly liable for damages caused by wildfires. Instead, utilities could use voluntarily created wildfire mitigation plans as proof that they took reasonable steps to prevent fires. These plans would need to outline high-risk service areas, vegetation management strategies, and wildfire response procedures.
Supporters of the bill argue that protecting utilities from strict liability will provide financial stability and help prevent insolvency due to wildfire-related litigation.
In written testimony, the trade group Power Companies of North Dakota described adherence to wildfire mitigation plans as essential for public safety and effective wildfire prevention. The group also stated that North Dakota common law already applies strict liability to electric infrastructure and that SB 2339 would formally establish this legal standard.
“This statutory change will provide meaningful regulatory certainty for creditors and rating agencies, underwriters, and insurers in the utility sector,” the group wrote.
However, insurance industry advocates argue the bill would shift financial responsibility for wildfire damages from utilities to insurers and consumers. The National Association of Mutual Insurance Companies (NAMIC) said the legislation would eliminate residents’ primary means of securing compensation when a utility is found responsible for a wildfire.
While NAMIC supports the use of mitigation plans, the group questioned why utilities would receive legal protections that other industries do not. The organization also raised concerns about limiting insurers’ ability to subrogate claims, which insurers rely on to recover costs from responsible parties.
“Adding the costs associated with utility-caused wildfires to insurers will simply shift that burden to the home or property owners through higher premiums or reduced coverage,” NAMIC wrote to lawmakers.
Similar legislation is being considered in Arizona, where lawmakers are debating liability limits for utilities and requiring power companies to create wildfire mitigation plans.
In North Dakota’s homeowners insurance market, the five largest providers in 2023, based on direct premiums written, were State Farm Group (14.17%), American Family Insurance Group (12.51%), Agraria Mutual Pool (9.49%), Farmers Insurance Group (9.13%), and Nodak Insurance Group (7.27%), according to BestLink.
