The Hawaiʻi Supreme Court issued a swift and unanimous ruling on Monday, rejecting insurers’ arguments and clearing the way to finalize the proposed $4 billion global settlement for Maui wildfire victims.
A lawyer representing victims said it could mean that survivors receive their first settlement payments by the end of the year.
“I think it's ambitious but possible for people to get their first check by the end of this year or early next year,” said Jesse Creed, liaison counsel for the plaintiffs in the fire lawsuits.
Gov. Josh Green told HPR that he was glad the court allowed the settlement to go forward.
Starting next month, he said he intends to begin making payments to some of the beneficiaries of the One ʻOhana Initiative. The fund, separate from the global settlement, compensates fire survivors and the families of those who died or were seriously injured.
Insurance companies have paid out more than $2.6 billion in claims from the 2023 fires and expect to pay nearly $800 million more. The companies sued to block the global settlement so they could seek up to that amount from Hawaiian Electric, Hawaiian Telcom, and Kamehameha Schools.
What did the decision say, and what does it mean for fire survivors?
A legal concept called subrogation lets insurance companies stand in the shoes of their policyholders to sue potentially negligent entities. But after hearing oral arguments last Thursday, the state Supreme Court found that the property and casualty insurers’ right to subrogation is limited by state law.
Michael Wara, the director of Stanford University’s Climate and Energy Policy Program, said that the decision largely favors the parties involved in the global settlement — including fire survivors, Maui County, and Hawaiian Electric.
He said that the ruling means the insurance companies “are not entitled to a piece of the settlement, which would have blown up the settlement agreement.”
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Tred Eyerly is of counsel with the Hawaiʻi firm Damon Key Leong Kupchak Hastert and was not involved in the case. He said the court’s order was a definite win for backers of the settlement.
"There's going to be some procedural hurdles to get through, but I think this opened the door to allow the settlement to go through," he said.
The lawsuit now returns to Circuit Court Judge Peter Cahill.
Creed said the next steps will entail deciding how to divide the $4 billion settlement among those affected by the fires. Claims administrators will make an independent determination to split the settlement “among these extraordinary losses of people who suffered a great deal,” he added.
Wara, who served as a wildfire commissioner for California, said the settlement is “much better” for Maui fire victims than the 2019 PG&E settlement was for Californians.
“The Lahaina fire victims are going to get cash. And in the PG&E context, they got shares in the company that had done them grievous harm, which was both upsetting, frankly, and also meant that they were locked up in the future financial health of this company,” Wara said.
“At least Lahaina victims — in what must seem like a long time to them, but in a relatively short period of time, if you look at other fires — are getting their money so that they can have finality over what they're going to get, and then rebuild their life in Lahaina or somewhere else.”
Can insurers appeal the decision?
The Hawaiʻi Supreme Court is considered the court of last resort for matters of state law. Eyerly said the insurers could ask the court to reconsider the matter, but there are no other legal avenues through which they can challenge the decision.
“Other than a motion for reconsideration, I think that's the end of the road, as far as enforcing their subrogation rights for the insurers,” he said.
The ruling leaves open the possibility for insurance companies to pursue legal claims on individual policyholders’ properties. But in these actions, the burden of proof will rest on the insurance companies to try and recoup payouts from their own policyholders through what is known as a lien.
Cynthia K. Wong, a Maui attorney and liaison counsel for the plaintiffs in the lawsuits, said in an email shared with HPR that if the insurance companies take this approach, they will have to prove the nature and extent of their lien in every instance in which they have paid out a Maui fire claim.
“I believe that we will be able to fight them on each individual basis based on the terms of the settlement,” she wrote.
What does the decision mean for the insurance market?
In court filings, industry groups like the Hawaii Insurers Council argued that a decision in favor of the settlement would destabilize the insurance market and lead to insurers pulling out of the state.
The Property Insurers for Hawaii, a coalition of more than 160 property and casualty insurers, said in a statement that they are disappointed by the ruling and believe it sets a troubling precedent.
“Subrogation is vital to a healthy and stable insurance market,” they wrote.
Green said it should be in the best interests of companies to stay in the Hawaiʻi insurance market, and that he is “positive” that some local insurers will choose to stay despite the rising cost of insuring properties.
“Our local guys told me they understood that the settlement had to occur. The guys on the mainland who prefer profit, perhaps much more big profits, they'll make their own call, but they shouldn't mess with me, because I'm going to put people out first,” he said.
This isn’t the first time the state has weathered an insurance crisis. In the aftermath of Hurricane ʻIniki, insurance companies did not have enough funds to pay out policyholders’ claims. Tens of thousands of homeowners were forced to pay premiums up to five times higher than before the storm, while others were denied insurance entirely.
“Hawaiʻi is not unfamiliar with having to prop up the market for a while, while insurers regain comfort with it,” Wara said. “I don't know that this will rise to that level for Hawaiʻi, but it's happening in a context where insurance markets everywhere are strained.”
Whether insurers raise premiums or decide to pull out of the market will depend on a number of factors, Wara said, including whether the companies assumed they would be able to subrogate policyholders’ claims and receive damages from suing HECO, Hawaiian Telcom, and Kamehameha Schools.
If so, “then this would be a big shock to their balance sheets, and it might cause them to pull back from the market, at least for some time,” he said.
What does the decision mean for Hawaiian Electric?
The state Supreme Court’s ruling means that insurance companies are not allowed to subrogate policyholders’ claims and sue parties, including HECO, for damages stemming from the Maui wildfires.
HECO’s stock rose 10% following the court’s decision. The company said in a statement that the decision “reinforces the durability of the global settlement.”
“It also provides greater clarity for all parties, including Hawaiian Electric, helping to reestablish the financial stability needed to invest in a resilient and sustainable future for our customers and our state. That includes advancing our wildfire safety strategy and strengthening Hawaiʻi’s infrastructure to ensure the reliability and resilience of the grid,” the statement read in part.
Green said the ruling gives lawmakers “security and understanding” about the future.
“We don't have to worry about HECO going bankrupt, and we also know exactly what our exposure as a state is,” he said.
State lawmakers are currently considering measures related to the housing insurance market and Hawaiian Electric's solvency. Sen. Jarrett Keohokalole has introduced a bill to allow HECO to issue ratepayer-backed bonds to finance a $1 billion wildfire recovery fund. He said the Hawaiʻi Supreme Court's decision comes at a critical time.
"I think it definitely provides some clarity and some certainty for everyone involved, which is a good thing — especially on the legislative side, we were hoping to have some sort of certainty on this lawsuit while we are in session, so that we can make decisions based off of it," Keohokalole said.
HPR’s Ashley Mizuo contributed to this story.
