Hawaii’s Supreme Court will address key questions that could determine the fate of a $4 billion settlement tied to last year’s devastating Maui wildfires.
An island judge recently agreed to present questions to the state’s High Court about how insurance companies may seek to recover funds paid to policyholders.
Entire neighborhoods, including 80 percent of Lahaina, were decimated last year in the blaze, killing 102 people in the process. On Wednesday, the Supreme Court issued an order accepting the case, asking attorneys from all parties to submit briefs within 40 days.
From here, it’ll be determined whether the settlement can proceed.
“It’s still a big step even though it was expected,” said Jake Lowenthal, an attorney representing individual plaintiffs. He emphasized that the court’s decision on these issues will be pivotal for the settlement’s future.
If the court allows insurance companies to file independent lawsuits, it could potentially drain the $4 billion settlement pool, reducing the amount available to compensate individual fire victims.
If the court rules against the insurers, the settlement process can proceed, and compensation for victims would begin.
The hall of historic Waiola Church in Lahaina and nearby Lahaina Hongwanji Mission are engulfed in flames along Wainee Street on August 8, 2023, in Lahaina, Hawaii. The settlement involves several defendants, including Hawaiian Electric, the company accused of playing a role in causing the fires, as well as Maui County and other large landowners.
Matthew Thayer/The Maui News via AP, File
Insurance companies that have already paid over $2 billion in claims want to pursue independent legal action against the entities blamed for causing the wildfire.
This process, known as subrogation, is standard in the insurance industry, allowing insurers to seek reimbursement from those held responsible.
The $4 billion settlement, reached on August 2—almost a year on from the thick of the destruction—was an agreement to resolve claims related to the Maui wildfires.
It came as part of a part of a broader effort to compensate victims for the significant losses caused by the fires, including the destruction of homes and livelihoods.
It also aimed to address claims of negligence against Hawaiian Electric, which some believe sparked the fires through its equipment failures, such as downed power lines.
Initially, there were fears that the sheer number of legal claims might force the company into bankruptcy.
Settling for $4 billion was seen as a way to avoid that outcome.
“We look forward to making our case before the Hawaii Supreme Court about the importance of maintaining insurers’ independent lawful rights to subrogation, which is the industry standard nationally and protects the interests of all policyholders,” said Vincent Raboteau, an attorney representing the insurance companies.
However, in an earlier ruling, Maui Judge Peter Cahill restricted insurers from seeking reimbursement solely from the settlement pool already agreed upon by the defendants.
This decision prevents them from filing additional lawsuits against those held responsible for the disaster, a crucial condition of the settlement.
A Mercy Worldwide volunteer makes damage assessment of charred apartment complex in the aftermath of a wildfire in Lahaina, western Maui, Hawaii on August 12, 2023. Insurance companies had already paid out more than $2 billion to policyholders affected by the wildfires. They are seeking to recoup these funds from the settlement, which has complicated the situation.
YUKI IWAMURA/AFP via Getty Images
A key component of the settlement is preventing insurers from pursuing separate claims against these defendants.
“If they rule that the insurance companies do have an independent right to pursue their own suits against the same defendants then the settlement agreement is null and void, basically,” Lowenthal said.
If the Supreme Court sides against the insurance companies, the settlement claims process can begin, allowing compensation to reach the wildfire victims.
One central issue before the court is whether state statutes that govern health care insurance reimbursement also apply to casualty and property insurers, limiting their ability to take independent legal action.
Attorneys representing the insurance companies argue that they are not trying to hinder fire victims from receiving their settlement payouts.
They maintain that their goal is to hold the defendants accountable for the tragedy.
Meanwhile, attorneys for individual plaintiffs warn that if insurers are allowed to seek separate reimbursements, it could undermine the settlement and deplete the funds intended for fire victims.
It could also lead to drawn-out legal battles, delaying the compensation process.
This article includes reporting from The Associated Press.
