Evolving Inverse Condemnation Liability Risks In California: What Water Suppliers And Utilities Should Monitor

Two articles in Nossaman’s California Water Views – 2026 Outlook highlight a shifting inverse condemnation liability landscape in California—one that carries important implications for eminent domain professionals, water suppliers, utilities, public agencies and infrastructure owners alike.

Recent case law suggests that inverse condemnation exposure for water suppliers may be expanding in meaningful ways. Courts are increasingly willing to entertain claims where property owners can show they were “singled out” or disproportionately impacted by public water systems—even when impacts extend to entire neighborhoods rather than individual properties. At the same time, long-standing defenses such as the “invited water” doctrine may no longer provide the same level of protection, particularly where customers lack meaningful alternatives to public water service.

In parallel, California policymakers are actively reconsidering the broader framework of inverse condemnation liability in the context of wildfires. Recommendations from recent state reports suggest a potential shift away from strict liability toward a fault-based standard—along with proposals to cap damages, limit certain recoveries and expand funding mechanisms to better distribute catastrophic risk. If implemented, these changes could represent a fundamental shift in how liability is allocated across public agencies, utilities and ratepayers.

Together, these developments underscore a key theme: liability doctrines once considered settled are now in flux. For those in the eminent domain space, these shifts may influence project risk assessments, valuation considerations and litigation strategies—particularly as courts and policymakers continue to redefine how public infrastructure impacts are allocated.

For a deeper look at these emerging trends and their broader implications, download the Nossaman’s California Water Views – 2026 Outlook.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.