World's Largest Insurer Sued Over Response to Lava Claim

Jul 26, 2018

A lava river cuts through Leilani Estates, the subdivision where the Haysmer residence was located.
Credit U.S. Geological Survey

The eruption at Kilauea has been disrupting life in Puna for almost 3 months. At present, over 700 homes have been destroyed. Many more have been abandoned due to unsafe conditions and lack of access.

Some residents have been receiving payouts from their homeowners insurance to cover the damage. But others are not so lucky. One Big Island couple is suing their insurer over the company's lack of response.

The Leilani Estates home of Phillip and Lanell Haysmer was destroyed by fire in mid-May. The property was covered through Lloyd’s of London – the world’s largest insurer. But 2 months later, the couple still has not received a payout on their claim. This week the Haysmer’s filed suit against Lloyd’s alleging a breach of contract. Kealakekua lawyer Jeffrey Foster is representing the couple.  

Credit Wikimedia Commons / USGS

Lloyd’s was one of the few options for homeowners insurance available to residents of Lava Zones 1 and 2. Russell Ruderman is the State Senator representing Puna at the Legislature.

One point made in Haysmer’s lawsuit is that Lloyd’s of London is not licensed by the State to actually sell insurance in Hawaii. The British insurance giant is what’s known as a “Surplus Line” or “Non-Admitted” Carrier.

Credit Wikimedia Commons / USGS

Gordon Ito is the Insurance Commissioner for the State of Hawaii. According to him, that status limits the state’s power to regulate Lloyd’s. It also means that they can operate in Hawaii without a traditional license required for other insurers. 

Despite the challenges, not all homeowners in Puna have experienced as much difficulty getting a claim reimbursed. The East Hawaii real estate market is currently booming with displaced residents seeking to replace destroyed homes.