This newsletter provides updates and legal observations on recent regulatory and litigation activity related to wildfires. This edition highlights the Forest Service’s ability to bypass environmental assessments for wildfire prevention, Nevada and California’s regulatory action concerning insurance coverage of wildfires and litigation across the United States related to wildfires.
I. Federal Wildfire Regulatory
Court Invalidates Forest Service Rule for Commercial Logging
On Jan. 13, 2026, a U.S. District Court in Oregon issued a decision invalidating Categorical Exclusion 6 (CE-6), a 34-year-old Forest Service rule that allowed commercial logging projects on federal lands to bypass the environmental assessments normally required under the National Environmental Policy Act when justified as wildfire prevention or forest improvement measures. The court found that the Forest Service’s decision to permit unlimited commercial thinning under CE-6 was “arbitrary and capricious” because the agency never considered the environmental impact of thinning at any scale and therefore did not engage in a “reasoned decision” regarding environmental impacts. As a result, the ruling vacated the exemption nationwide and reversed approvals for three large logging projects covering approximately 29,000 acres in Oregon’s Fremont-Winema National Forest.
Conservation groups that brought the lawsuit characterized CE-6 as a “logging loophole” that had been exploited for large-scale commercial timber harvests with no acreage cap, often in remote areas far from the communities purportedly being protected from wildfire. A review of Forest Service projects found CE-6 was the most commonly used categorical exclusion, applied to more than 3 million acres over the past two decades. The ruling may also affect the implementation of President Donald Trump’s March 2025 executive order aimed at expanding American timber production, as a Forest Service official had identified CE-6 as key to achieving those objectives. However, the court emphasized that the Forest Service retains other tools for wildfire mitigation, including other categorical exclusions and the option to conduct full environmental assessments.
II. State Wildfire Regulatory
Nevada Law Allows Insurance Companies to Exclude Wildfire Coverage
Nevada Assembly Bill 376, which took effect on Jan. 1, 2026, allows insurance companies to exclude wildfire coverage from homeowner policies — a first-of-its-kind law designed to keep insurers operating in the state as they increasingly pull out of wildfire-prone areas across the West. Under the law, insurers can offer wildfire coverage through separate supplemental policies or propose other innovative coverage options, and a regulatory “sandbox” provision permits insurance companies to test new business models and products with waivers from normal regulatory requirements. One key guardrail requires that any insurer choosing to carve out wildfire coverage must do so for its entire book of business statewide rather than selectively targeting specific high-risk areas.
The law has drawn criticism from consumer advocates who argue it could hollow out insurance protections and force homeowners to purchase two separate, more expensive policies instead of one comprehensive policy. A companion bill, which would have established a state-run Fair Access to Insurance Requirements (FAIR) Plan to provide last-resort coverage to homeowners unable to find insurance elsewhere, failed during the legislative session, leaving Nevada without the backstop available in neighboring California.
California Proposes Insurance Regulations for Wildfires
In early 2026, California lawmakers introduced several bills aimed at reforming residential property insurance practices in response to wildfire survivor experiences.
Senate Bill 876, authored by Sen. Steve Padilla and sponsored by Insurance Commissioner Ricardo Lara, is the most comprehensive proposal. It would double civil penalties for unfair claims practices during declared emergencies (from $5,000 to between $10,000 and $20,000 per willful violation); require insurers to submit disaster response plans to the Department of Insurance; expand additional living expense policy limits by 100% in cases of total loss; mandate upfront cash-value payments within 30 days of a contract to rebuild; and require insurers to offer extended and guaranteed replacement cost coverage when writing policies.
Senate Bill 877, co-authored by Sens. Sasha Renée Pérez and Ben Allen, would require insurers to provide claims-related documents to policyholders within 15 days and disclose any changes to repair estimates along with explanations of who approved them and why.
Senate Bill 878, authored by Pérez, Allen and Sen. John Harabedian, would require insurers to pay 20% annual interest if they fail to meet deadlines for claims payments. It also would mandate quarterly reporting to the Department of Insurance — signed under penalty of perjury by a corporate officer — showing the company’s compliance with prompt payment requirements.
Additionally, Assembly Member Lisa Calderon reintroduced Assembly Bill 1559 to regulate insurers’ use of drone imagery, which would require companies to notify consumers before taking aerial images of their properties, ban coverage terminations based on drone images taken more than 180 days before notice and require insurers to provide those images to policyholders so they can dispute accuracy. The insurance industry opposed these measures, with the Personal Insurance Federation of California warning that “it appears these measures would worsen the current affordability and availability crisis for Californians just as we are starting to implement the Commissioner’s Sustainable Insurance Strategy to restore a healthy and competitive market.”
III. Wildfire Litigation
Oregon Court Overturns Class Action Verdict Against PacifiCorp
On April 8, 2026, the Oregon Court of Appeals overturned a class action verdict, holding PacifiCorp, a subsidiary of Berkshire Hathaway, responsible for widespread property damage caused by wildfires during the 2020 Labor Day weekend. The court determined that the trial judge improperly instructed the jury that it could treat the evidence presented as universally applicable to every member of the class, even though the litigation involved four distinct fires — each separated by more than 100 miles — with different ignition causes and varying proof of harm. This flawed instruction was central to a 2023 liability finding that opened the door to subsequent damages awards approaching $1 billion across a series of individual smaller trials. The appellate panel sent the case back to the trial court with the option to revisit its class certification decision entirely.
Notably, the appellate ruling did not address the underlying question of whether PacifiCorp was negligent in failing to de-energize power lines or maintain vegetation during dangerous wind conditions. Attorneys for the affected property owners characterized the decision as a procedural obstacle rather than a vindication of PacifiCorp’s conduct and indicated the case could proceed again with a corrected jury instruction. PacifiCorp, which has already settled roughly $2.2 billion in wildfire-related claims and recently agreed to a $575 million payment to resolve federal government claims, stated that it remains willing to address legitimate claims but maintained that the class action format was prejudicial and inappropriate for this type of litigation.
Federal Government Files Suit Against PacifiCorp for Oregon Fires
In United States v. PacifiCorp, the federal government sued Pacific Power and its parent company PacifiCorp in the U.S. District Court for the District of Oregon, alleging that the defendants’ negligent failure to maintain their power lines caused the Archie Creek Fire on Sept. 8, 2020. The fire, which began along the North Umpqua River in Douglas County during dry east winds, burned over 131,000 acres, including more than 67,000 acres of federal land. The government seeks to recover over $900 million in costs and damages. The complaint asserts claims for negligence, negligence per se, trespass by fire, common law nuisance and breach of license.
In an opinion dated Aug. 26, 2025, Judge Karin J. Immergut ruled on defendants’ partial motion to dismiss. The court dismissed the negligence per se claim with leave to amend, holding that the Oregon statutes cited by the government do not define a standard of care sufficient to support such a claim, and that while certain regulations could provide a standard of care, the complaint failed to identify specifically how defendants violated those regulations. However, the court denied the motion to dismiss the breach of license claim, finding that the government adequately pleaded a breach of contract claim based on Pacific Power’s FERC license, which imposed contractual obligations including a duty to “suppress fires.”
Michigan Gets EPA Exception for Canadian Wildfires, Loses Ambient Air Quality Standards Designation
Sierra Club v. United States Environmental Protection Agency (6th Cir., Dec. 5, 2025) involves a challenge by the Sierra Club to two EPA decisions concerning the Detroit area’s attainment of ozone National Ambient Air Quality Standards under the Clean Air Act. The Sierra Club contested (1) the EPA’s approval of Michigan’s request to exclude air quality data from June 24 and 25, 2022, on the grounds that wildfires in Canada constituted an “exceptional event” that affected the data, and (2) the EPA’s redesignation of the Detroit area from nonattainment to attainment, arguing that Michigan had not met reasonably available control technology (RACT) requirements that came due after it filed its redesignation application.
The Sixth Circuit affirmed the EPA’s Exceptional Event approval, finding that the EPA conducted a thorough evaluation and provided a satisfactory explanation for its decision, including evidence from brown carbon measurements and meteorological analyses showing that the ozone exceedances were due to wildfire smoke rather than local pollution. However, the court vacated the Detroit area’s redesignation to attainment, holding that the Clean Air Act’s requirement that a state “has met all requirements applicable to the area” uses present-perfect tense, meaning compliance must continue until the date of redesignation — not merely at the time the redesignation application was submitted. Because Michigan failed to implement the RACT requirements that became due after its application but before the redesignation, the EPA lacked authority to redesignate the area.
Texas Sues Xcel Energy Over Panhandle Fire
On Dec. 16, 2025, Texas Attorney General Ken Paxton filed a lawsuit against Southwestern Public Service Company, operating as Xcel Energy, for causing the Smokehouse Creek Fire — the largest wildfire in recorded Texas history. The fire, which began on Feb. 26, 2024, consumed over 1 million acres, killed three people and more than 15,000 head of cattle, and caused over $1 billion in economic damages. Paxton stated that “Xcel’s blatant negligence killed three Texans and caused unfathomable destruction in the Texas Panhandle” and that “the company made false representations about its safety commitments and ignored warnings that its aging infrastructure needed immediate repair.”
The state’s complaint alleges that Xcel was notified on approximately Feb. 9, 2024 — less than three weeks before the fire — that utility poles needed immediate replacement due to advanced deterioration, with some poles dating back to 1936. Despite known hazardous fire weather conditions, the company failed to act. The lawsuit asserts claims for negligence, gross negligence, trespass, public nuisance, unjust enrichment and violations of the Texas Utilities Code and Deceptive Trade Practices Act. In addition to seeking monetary damages and civil penalties, the state requests injunctive relief to compel infrastructure safety improvements and to prohibit Xcel from passing any fire-related costs on to its Texas customers.
Hawaiian Electric Settles With Investors
Hawaiian Electric Industries agreed to pay $47.75 million to settle a securities lawsuit brought by shareholders who alleged the company made false or misleading statements about its wildfire prevention and safety measures prior to the August 2023 Maui fires. The original complaint challenged 25 specific statements about the utility’s wildfire risk mitigation efforts, with shareholders contending that Hawaiian Electric falsely represented it was taking appropriate action to reduce the risk that its utility poles could trigger wildfires — particularly in western Maui, where the spread of dry grass created highly flammable conditions around populated areas. The preliminary settlement, filed with the U.S. District Court in San Francisco in early January 2026, requires judicial approval. Hawaiian Electric denied wrongdoing and indicated it set aside funds for the settlement and expected insurers to provide funding. This shareholder settlement is separate from the approximately $4 billion compensation agreement for victims of the wildfire that killed more than 100 people and destroyed much of the historic town of Lahaina.
Families File Wrongful Death Lawsuits Against Los Angeles
Families of victims killed in the Palisades Fire have filed more than a dozen wrongful death lawsuits against Los Angeles and California. The lawsuits were filed in the final weeks of 2025 to meet a Dec. 31, 2025, deadline under California Code of Civil Procedure Section 377.34; it permitted families to seek compensation for pain, suffering or disfigurement endured by victims prior to their deaths — a provision that was only in effect from Jan. 1, 2020, through Dec. 31, 2025. The Palisades Fire claimed 12 lives and destroyed over 7,000 structures, ranking among the most destructive wildfires in California history. The lawsuits arise amid mounting questions about the government’s fire response, including evidence that firefighters warned against leaving a smoldering New Year’s Eve fire unattended but were ordered to leave anyway — that fire subsequently reignited six days later into the catastrophic Palisades blaze — and that state parks officials restricted firefighting operations in certain “avoidance areas” to protect endangered plants, with the fire reigniting in one of those restricted zones.
IV. What We Are Monitoring
NARUC Releases Final Chapters of Wildfire Workbook
The National Association of Regulatory Utility Commissioners released the final four chapters (chapters 4 through 7) of its Wildfire Workbook on Jan. 22, 2026, completing an interactive resource designed to assist regulators, utilities and policymakers in managing wildfire risks. These final chapters focus on response and coordination, cost recovery mechanisms, financial risk and wildfire mitigation efforts, providing frameworks for balancing utility liquidity with ratepayer affordability through standardized cost recovery mechanisms, understanding how to mitigate financial liabilities and applying quantifiable metrics to measure the effectiveness of safety investments. NARUC President Ann Rendahl described the workbook as “a comprehensive playbook for regulators, state officials and utilities by addressing the critical issues related to wildfires through case studies, research and analysis to help manage the lifecycle of wildfire risks.”
Public Pushes Back on Xcel Energy PSPS in Colorado
Xcel Energy’s Public Safety Power Shutoffs (PSPS) in Colorado during December 2025 generated significant backlash from residents, businesses and lawmakers. More than 4,000 Coloradans responded to a state survey, with most expressing dissatisfaction and believing the utility overreacted during the Dec. 17 and 19 shutoffs, which affected approximately 52,000 customers across Boulder, Clear Creek, Jefferson, Larimer and Weld counties due to hurricane-strength winds with gusts exceeding 100 mph. In a nearly five-hour hearing on Jan. 30, 2026, Colorado lawmakers questioned Xcel Energy President Robert Kenney about the shutoffs, with legislators raising concerns about communication failures, hardships faced by constituents — including homes dropping to temperatures as low as 33 degrees — and allegations that the shutoffs were driven by litigation avoidance rather than actual fire risk. Businesses reported substantial losses, with a Golden Chamber of Commerce survey of 100 businesses tallying nearly $2 million in damages and the Boulder Chamber finding an average financial loss of $25,000 among 300 surveyed employers. The Colorado Public Utilities Commission is now gathering testimony to write new rules governing PSPS events, with three major concerns emerging: inadequate communication from Xcel, an unreasonable financial burden concentrated on specific communities, and ongoing risks to medically vulnerable residents dependent on electricity for oxygen and other life-sustaining equipment.
Look for new editions every quarter, and feel free to reach out to the McGuireWoods Environmental Enforcement & Regulatory Counseling Practice Group with questions regarding wildfire issues.