JD Morris has the story at the San Francisco Chronicle, "California's strict wildfire liability rule hangs over bankrupt PG&E."
The story is about inverse condemnation of course, and how California law applies that doctrine in cases involving what look like natural disasters, most notably the state's recent experiences with major wildfires.
We provided comments on whether an insurance fund might make some sense (because isn't the mail goal of inverse liability to spread the economic burden of public benefits?). And the story also picks up on the recent 2-1 Ninth Circuit decision on how inverse claims which have not been reduced to judgment get treated in bankruptcy:
The wildfire fund alternative Paulo identified could be evaluated by a new committee focused on wildfires and utilities that was authorized by Dodd’s bill, SB901. Gov. Gavin Newsom appointed his three members to the committee just last month, and Dodd said it “absolutely” makes sense for them to study the issue.Such a fund could accomplish the same goal as inverse condemnation by providing a source of funds for a utility to draw on to make victims whole when power lines cause fires through no negligence on the company’s part.
“The express goal of inverse condemnation is to put the owner back into the financial condition they would have been in had the inverse condemnation not occurred,” said Robert Thomas, a Hawaii lawyer who writes a blog on the topic at www.inversecondemnation.com. “It’s simply a cost-spreading device. ... Insurance seems like, if it were to achieve that same thing, then at least in theory it sounds like something that could be workable.”
PG&E might even find a way to bring up inverse condemnation in bankruptcy court, Thomas said. He pointed to a recent opinion from a Ninth U.S. Circuit Court of Appeals panel in a case involving an inverse condemnation claim and the city of Stockton’s bankruptcy. [See this post for more on that case.]
In a 2-1 decision, the appeals court in San Francisco held that Stockton could treat a certain inverse condemnation claim just like any other unsecured claim in its bankruptcy case, putting it toward the back of the line and allowing the city to jettison the debt. Thomas said the case, which involved a land dispute, has some parallels to PG&E’s situation.
But Douglas Baird, a law professor at the University of Chicago, said he doesn’t think the case will prove decisive on how wildfire victims are treated in the PG&E bankruptcy.
“The effect of the Ninth Circuit’s majority opinion is they’re just saying these are ordinary, unsecured claims in bankruptcy that can be discharged,” Baird said after reviewing the opinion. “But they’re not saying that somehow they’re unusually low” priority.
Check out the entire piece here.
