Inverse Condemnation and PG&E Wildfires

When PG&E’s electrical lines spark a fire, and the fire damages someone’s real or personal property, PG&E must pay for the damage.  It must pay even if it did nothing wrong.  That’s because of the legal doctrine of “inverse condemnation,” a doctrine somewhat unique to California.

Condemnation.  We have all heard of “condemnation.”  That’s when a governmental entity uses its power of eminent domain to take someone’s property for public use.  For example, the government may take private property to put a road through an area. If a public utility such as PG&E wishes to take property to, say, put powerlines through it, the utility must file a lawsuit in court against the property’s owner.  The purpose of the lawsuit is to determine how much the utility has to pay to the property’s owner.

Inverse Condemnation.  Sometimes a public utility such as PG&E does something that constitutes a “taking” of private property without court authority.  Usually the “taking” is the result of the utilities actions adjoining the owner’s property that renders the owner’s property worthless. The doctrine of inverse condemnation allows the property owner to sue utility, requiring the utility to pay for what it took.

As one court explained:

An inverse condemnation action is an eminent domain action initiated by one whose property was taken for public use. (Barham v. Southern Cal. Edison Co. (1999) 74 Cal.App.4th 744, 752.) The authority for such an action “derives from article I, section 19 of the California Constitution, which states in relevant part: `Private property may be taken or damaged for public use only . . . when just compensation . . . has first been paid to, or into court for, the owner.'” (Pacific Bell Telephone Co. v. Southern California Edison Co. (2012) 208 Cal.App.4th 1400, 1404.) The policy underlying inverse condemnation is to spread among the community (through the public entity’s taxing authority) any burden disproportionately borne by an individual member of the community whose property is taken for a public use. (Barham, at p. 752.)

Electrical Utilities are Liable under the doctrine of Inverse Condemnation for wildfires they spark. When a utility starts a fire, such as the Dixie Fire, and the fire spreads to and damages private property, that is considered a “taking” of private property.  The property owner is permitted to sue the electrical utility to obtain “just compensation” for the property that was taken.

Investor-owned utilities Such as PG&E can be liable for inverse condemnation.  PG&E isn’t a governmental entity.  Rather is its privately-owned.  Nonetheless, because PG&E has the power of eminent domain, the doctrine of inverse condemnation applies to PG&E just as to governmentally owned utilities.  See Pacific Bell, at pp. 1407-1408; Barham, at p. 748.

PG&E Must Pay Attorneys Fees.  One other thing about wildfire claims that is highly unusual:  In most lawsuits, each side must pay its own attorneys’ fees.  In inverse condemnation lawsuits, PG&E must pay the attorneys fees of the private party who is suing it. According to Code of Civil Procedure section 1036:

“In any inverse condemnation proceeding, the court rendering judgment for the plaintiff by awarding compensation, or the attorney representing the public entity who effects a settlement of that proceeding, shall determine and award or allow to the plaintiff, as a part of that judgment or settlement, a sum that will, in the opinion of the court, reimburse the plaintiff’s reasonable costs, disbursements, and expenses, including reasonable attorney, appraisal, and engineering fees, actually incurred because of that proceeding in the trial court or in any appellate proceeding in which the plaintiff prevails on any issue in that proceeding.”

When we make a Dixie Fire claim against PG&E on a client’s behalf, we bring it under the law of inverse condemnation.