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Inverse Condemnation: California Courts Hold Utilities Liable for Wildfire Damages

By Peterson Law Group on April 2, 2025

California has endured a relentless onslaught of wildfires in recent years, devastating homes, displacing communities, and causing billions in property losses. Investigations have repeatedly pointed to utility companies as the origin of some of the most destructive blazes.

In response, California courts have turned to inverse condemnation as a legal mechanism for holding utilities accountable for wildfire-related property damage, even when utilities followed safety regulations.

This doctrine has become a cornerstone of property damage compensation for affected homeowners, business owners, and landholders. At Peterson Law Group PC, we’ve long advocated for the rights of property owners, and our experience in inverse condemnation California litigation places us at the forefront of helping clients recover what they’ve lost.

What Is Inverse Condemnation?

Inverse condemnation is a constitutional principle rooted in both federal and California law. It provides property owners with a legal avenue to seek compensation when their property is damaged or taken by the government or a utility acting in a public service capacity without formal eminent domain proceedings.

Under Article I, Section 19 of the California Constitution, if a property is “taken or damaged for public use,” the owner must be justly compensated. Unlike typical negligence claims, inverse condemnation does not require proof of fault. Instead, it centers on the idea that those who benefit from a public utility’s services should also bear the financial burdens when that service causes damage.

Why Inverse Condemnation Matters in Wildfire Litigation

In the context of wildfires, this doctrine allows victims to pursue property damage compensation from utilities whose infrastructure has sparked devastating fires, even when the utility followed existing regulations or was not otherwise negligent.

For instance, if a utility’s power line fails due to high winds and sparks a fire that damages the surrounding property, property owners may pursue damages under inverse condemnation. Courts have reasoned that utilities, as providers of essential public services, have the financial capacity and legal obligation to compensate for the harm caused by their operations.

Legal Precedents Strengthening Utility Liability

California courts have consistently upheld the application of inverse condemnation in utility lawsuits. Several recent rulings have reinforced this interpretation despite pushback from utility companies seeking to limit their financial exposure.

Pacific Bell Telephone Co. v. Southern California Edison Co. (2021)

In this decision, a California appellate court reaffirmed that inverse condemnation applies to investor-owned utilities, even when damage occurs due to a single piece of failed equipment. The court emphasized that utilities can and should spread the cost of such damages through rate adjustments or insurance.

City of Oroville v. Superior Court (2019)

Although not a wildfire case, this ruling clarified that inverse condemnation liability does not require government misconduct. The California Supreme Court ruled that a city could be held liable for property damage resulting from its sewer system despite having met all safety requirements. This decision further entrenched the principle that fault is not a prerequisite for liability under inverse condemnation.

PG&E Bankruptcy and Camp Fire Litigation (2018–2020)

Following the devastating Camp Fire, which destroyed the town of Paradise, PG&E filed for bankruptcy in part due to the overwhelming volume of wildfire liability claims. The utility ultimately agreed to a $13.5 billion settlement for fire victims, much of which was influenced by the threat of inverse condemnation claims. Although legislative reforms have since altered how wildfire funds are distributed, this case remains a landmark example of the doctrine’s power.

Finding an Experienced Law Firm

Inverse condemnation claims differ significantly from traditional civil lawsuits. They require deep knowledge of:

• Public utility operations and regulatory frameworks
• Constitutional takings law
• Government claim procedures
• Land valuation and damage modeling

Unlike negligence-based claims, inverse condemnation focuses on proving causation and establishing that the property damage was tied to a public use or utility function. If those elements are satisfied, the court is likely to find in favor of the plaintiff, regardless of fault.

At Peterson Law Group PC, we’ve handled high-stakes cases involving land use litigation, eminent domain, and inverse condemnation claims in California. Our team brings decades of legal experience and a proven ability to hold public entities and utility companies accountable for their actions.

Compensation and Inverse Condemnation Claims

If your home, land, or business has been damaged by a wildfire linked to utility negligence or infrastructure failure, you may be entitled to significant compensation, including:

• Structural and property repair costs
• Loss of use or rental income
• Vegetation and landscape damage
• Emotional distress or nuisance claims
• Diminished property value
• Costs associated with temporary relocation

The value of your claim may be substantially higher under inverse condemnation because liability is often easier to establish, and fault is not required.

Steps to Take If You’ve Suffered Wildfire Damage

If you suspect that a wildfire damaging your property was caused by utility infrastructure, take these steps immediately:

1. Document everything: Photos, videos, and written records of the damage are essential.
2. Keep receipts: Save receipts related to repairs, hotel stays, replacement items, and cleanup services.
3. Track communication: Save any notices or correspondence from your utility provider or emergency services.
4. Contact an attorney: The sooner you begin working with an experienced legal team, the stronger your case will be.

Contact an Influential Inverse Condemnation Attorney in Los Angeles

Led by attorney John S. Peterson, our firm has been recognized by Best Lawyers and the American Board of Trial Advocates for our leadership in inverse condemnation and land-related litigation. John is also a member of the exclusive Multi-Million Dollar Advocates Forum.+

We have represented clients in cases involving both private and public entities and we have an impressive track record when it comes to getting full and fair compensation for our clients.

To learn more about your legal options, contact the Los Angeles inverse condemnation lawyers at Peterson Law Group PC by calling (213) 319-4993 today.