Answers to three questions posed to five justices could soon determine the fate of a stalled $4 billion settlement for close to 10,000 Maui
wildfire victims.
On Thursday, the Hawaii
Supreme Court is scheduled to hear oral arguments primarily from three groups of litigants with huge stakes in the outcome of more than 600 lawsuits seeking compensation from wildfires that destroyed most of Lahaina and properties in Upcountry Maui on Aug. 8, 2023.
Written briefs have been filed in the proceeding, though the justices of the state’s high court are being asked to weigh in on a few legal underpinnings of a ruling made almost six months ago by a state Circuit Court judge who barred insurance companies from pursuing compensation, through separate litigation, from the settlement payers.
At least 192 insurance companies have so far paid about $2.3 billion in claims to people and companies that lost property in the fires, which also killed 102 people. The insurers expect to pay over $1 billion in additional claims.
The fires caused an estimated $5.5 billion in damage, and several entities including Hawaiian Electric, the state and Kamehameha Schools agreed in August to pay $4 billion over four years to settle all claims held by victims.
However, the settlement proposed by independent mediators wasn’t agreed to by the insurers despite their participation in mediation. Yet the settlement was conditioned upon insurers agreeing either to not pursue, or exhausting options to pursue, the settlement payers directly in court for reimbursement of sums insurers paid to policyholders.
“As the insurers well know, their position is fatal to the settlement … as the global settlement reasonably and expressly contemplates, no settlement is possible so long as the insurers’ claims remain unresolved,” attorneys for the settlement payers wrote in their opening brief to the
Supreme Court.
The settlement payers, in their filing, suggest that the insurers are seeking to block the settlement to extract more money at the expense of fire victims.
“This Court should not countenance that manifestly inequitable result,” the brief by the settlement payers said.
Attorneys representing fire victims in over 600 lawsuits also contend the August ruling by Maui Circuit Judge Peter Cahill approving terms of the deal did not run afoul of applicable state law. Their opening brief said insurers, if they prevail, could receive reimbursements without knowing if their policyholders are fully compensated for what they lost.
“Where policyholders have paid the insurers to accept the risk of loss of a fire to their property, Hawaii
law and principles of equity demand that the insurers avoid competing with their policyholders for recovery and bear the burden of
under-compensation for any losses,” the attorneys for fire victims wrote.
Cahill’s ruling doesn’t prevent insurers from trying to claw back portions of settlement proceeds paid to policyholders if policyholder payouts exceed losses.
“The settlement addresses insurers’ claims, enabling them to recover so long as their insured has been made whole,” the settlement payers said in their brief.
The settlement payers also noted in their brief, “To be sure, it is impossible to know at this time whether the settlement will fully compensate every plaintiff; it may not, depending on the extent of damages each plaintiff has sustained.”
The insurers contend that under Hawaii law, they can’t be barred from trying to obtain their own compensation in court from the entities regarded as being responsible for the fires. They also suggest that the settlement sum should have been bigger, and describe the settlement as a form
of collusion between the
settling parties.
“In short, this case is before this Court because the Settling Parties are openly colluding with one another to destroy the (insurers’) legal rights and enrich the (parties responsible for the fires),” attorneys for the insurers wrote in their brief.
Hawaiian Electric has agreed to cover the biggest piece of the settlement, at $1.99 billion. A company power line damaged in high wind was found to be the cause of a fire that raged through Lahaina after
reigniting.
The state and Kamehameha Schools, owners of land with vegetation that
allowed the Lahaina fire to spread, agreed to pay
$872.5 million each. Spectrum Oceanic LLC and Hawaiian Telcom, companies that share utility infrastructure with Hawaiian Electric, are to collectively pay about $300 million.
The sums were determined by mediators as maximum fair and practicable amounts based on the facts and circumstances of the
disaster.
Each one of the roughly 40-page briefs filed in the Supreme Court case is heavily devoted to technical points and legal citations supporting preferred answers to three questions posed to the court.
One question has to do with whether a prior Hawaii court decision in a health insurance case applies to property and casualty
insurance carriers.
On the second question, all three parties seek the same answer.
The third question asks whether Hawaii law requires insured fire victims be made whole for all losses before their insurers can pursue reimbursement from those deemed responsible for the losses.
In addition to the three main parties to the case, briefs were filed by two individual insurance companies, Hyundai Marine &Fire Insurance Co. and The Dentist Insurance Co. Supporting briefs also were filed by several insurance industry trade associations.
The Supreme Court may not rule until some time after oral arguments are made.
Under revised terms of the tentative settlement, the issue with the insurers must be resolved by May 19 for the deal to become effective.
“In other words,” the settlement payers said in their brief, “the fate of the global settlement hangs in the
balance here.”