HONOLULU — On Monday, Hawaii’s Supreme Court announced a decision that prohibits insurance companies from initiating their own legal proceedings against parties deemed responsible for the devastating wildfire that struck Maui in 2023. This ruling paves the way for a substantial $4 billion settlement previously threatened by the prospect of collapse.
Finalizing this agreement involves various steps, including negotiations between thousands of individuals who have filed lawsuits and several defendants, notably Hawaiian Electric Company. The catastrophic wildfire was the deadliest in the United States in over a century, resulting in the loss of more than 100 lives, the destruction of thousands of homes, and incurring damages estimated at $5.5 billion. Following the blaze, numerous lawsuits were filed against several parties.
Although a settlement was proposed last summer, insurance companies resisted, asserting their right to take separate legal action against those at fault to reclaim funds paid to their policyholders. The ruling issued on Monday eliminates a significant obstacle to finalizing the agreement and now returns the case to a Maui judge for determining future steps.
Insurance companies seeking to recover the billions spent on claims voiced their disappointment over the ruling but refrained from disclosing whether they would seek a review from the U.S. Supreme Court. The central issue for the Hawaii Supreme Court focused on whether state regulations concerning healthcare insurance reimbursement also applied to property and casualty insurance, thereby limiting insurers’ capacity to undertake independent legal actions against liable parties. The justices affirmed this interpretation.
Plaintiff attorneys expressed concern that enabling insurers to seek separate reimbursements could jeopardize the settlement, diminishing the funds available for fire victims and extending legal proceedings. Gerald Singleton, one of the attorneys for the plaintiffs, stated that while they were still assessing the ruling, they were pleased with the outcome: “Now the settlement can take the next step forward.”
Just days ahead of the one-year anniversary of the August 8, 2023, wildfire, Hawaii’s Governor Josh Green announced that seven defendants accused of contributing to the disaster would pay $4 billion to resolve claims from thousands affected. This group includes Hawaiian Electric, the state of Hawaii, Maui County, and Kamehameha Schools, notable as Hawaii’s largest private landowner.
Legal representatives for individual claimants approved the settlement amid growing concerns that Hawaiian Electric might be nearing bankruptcy. Although victims’ attorneys recognized that $4 billion would not fully compensate for the losses suffered, they argued that it was a reasonable agreement, given the limited assets of Hawaiian Electric. Attorney Jesse Creed emphasized the importance of every dollar in helping to rebuild the community.
Following the ruling, the governor remarked that the decision would facilitate swifter healing for the victims as rebuilding efforts continue. Previously, he criticized insurance companies for pursuing reimbursement from policyholders, a legal practice known as “subrogation,” which he deemed unfair.
Subrogation allows insurance firms to recover claims they’ve disbursed and is seen as a way to mitigate costs from catastrophic events, thereby preventing increases in insurance premiums. This process is generally applicable in situations where fault lies with a third party rather than natural disasters like hurricanes. To date, insurance entities have disbursed over $2.3 billion to individuals and businesses affected by the wildfire, with expectations to pay an additional billion.
In their statement following the ruling, insurance companies asserted that subrogation is essential for a sustainable insurance market, permitting them to hold liable parties accountable. Jacob Lowenthal, another attorney representing plaintiffs, clarified that the ruling does not entirely preclude insurers from receiving reimbursements; rather, they must now establish, before a judge, the need for reimbursement if a policyholder receives a settlement exceeding their claim.
With the legal question regarding subrogation resolved, attention can now shift to the administrative claims process to determine individual awards based on each case’s specifics. Lowenthal concluded, “The Hawaii Supreme Court’s ruling was the correct outcome. The resolution of this critical issue allows the global settlement to now move forward, putting money into the hands of the Maui fire victims sooner than later.”
