SCRQ-24-0000602 IN THE SUPREME COURT OF THE STATE OF HAWAI'I IN THE MATTER OF THE PETITION FOR THE COORDINATION OF MAUI FIRE CASES.
RESERVED QUESTIONS FROM THE CIRCUIT COURT OF THE SECOND CIRCUIT (CASE NO. 2CSP-23-0000057)
ORDER
(By: Recktenwald, C.J., McKenna, Eddins, and Ginoza, JJ., and Circuit Judge Morikone, in place of Devens, J., recused)
The Circuit Court of the Second Circuit reserved three questions to this court. Upon consideration of the appellate briefing, the record, and oral argument,
IT IS HEREBY ORDERED that the reserved questions are answered as follows:
Question 1:
Does the holding of Yukumoto v. Tawarahara, 140 Hawaiʻi 285, 400 P.3d 486 (2017), that limited the subrogation remedies available to health insurers to reimbursement from their insureds under HRS § 663-10 and barred independent actions against tortfeasors who settled with the insureds extend to property and casualty insurance carriers?
Question 1 is answered in the affirmative. Our opinion in Yukumoto v. Tawarahara, 140 Hawaiʻi 285, 400 P.3d 486 (2017), extends to property and casualty insurers such that, under Hawaiʻi Revised Statutes (HRS) § 431:13-103(a)(10)(A), the lien provided for under HRS § 663-10(a) is the exclusive remedy for a property and casualty insurer to recover claims paid for damages caused by a third-party tortfeasor in the context of a tort settlement between an insured and the tortfeasor.
Question 2:
Is a property and casualty insurer’s subrogation right of reimbursement prejudiced by its insured’s release of any tortfeasor when the settlement documents and release preserve those same rights under HRS § 663-10?
Because the statutory lien under HRS § 663-10 is the exclusive remedy for a property and casualty insurer in the context of a tort settlement, Question 2 is answered in the negative.
Question 3:
Under the circumstances of the Maui Fire Cases and the terms of the “Global Settlement,” does the law of the State of Hawai‘i require that insureds be made whole for all claimed injuries or damages before their insurers can pursue a subrogation right of recovery or reimbursement against a third-party tortfeasor?
Question 3 is answered in the negative. Under the circumstances of this mass tort case, we decline to apply the made whole doctrine to the statutory lien-claim process established by HRS §§ 431:13-103(a)(10) and 663-10.
IT IS FURTHER ORDERED that this case is remanded to the circuit court for such other and further proceedings as may be appropriate consistent with this order.
We retain concurrent jurisdiction to enter an opinion and judgment that will follow.
DATED: Honolulu, Hawaii, February 10, 2025.
/s/ Mark E. Recktenwald /s/ Sabrina S. McKenna /s/ Todd W. Eddins /s/ Lisa M. Ginoza /s/ Kevin T. Morikone
PDF: Court Ruling
HNN: Hawaii Supreme Court clears way for Maui wildfire payout. What’s next? -- “for insurers seeking liens against each client’s settlement, after it is paid, is the 'exclusive remedy' for getting money from clients who received property damage insurance payments….”
KHON: In response to the ruling, the property insurers for Hawaii said in a statement:
“We are disappointed in the Hawai‘i Supreme Court’s ruling and believe this sets a troubling precedent that could significantly hamper the ability of Hawaii’s property and casualty insurers to pursue claims directly against the parties responsible for causing the Lahaina wildfires.
“Subrogation allows insurers to hold the at-fault parties legally accountable and financially responsible for their negligence when it results in property damage and personal injury losses. Subrogation is vital to a healthy and stable insurance market.
“The property insurers want those impacted by this tragedy to receive the resources they need to help them recover. Preserving the rights of insurers to utilize subrogation is of importance to the insurance industry, and is ultimately beneficial to all policyholders and residents statewide.”
HNN: Supreme Court makes unanimous decision on $4 billion Maui wildfire settlement
KITV: Hawaii Supreme Court ruling allows state to move forward with $4 billion Maui wildfire settlement | News | kitv.com
AP: Hawaii Court Rules Against Insurance Companies in Maui Wildfire, Allowing $4B Settlement to Proceed -- A representative for the insurance companies said he would get back to the The Associated Press to comment on the ruling and whether they will ask for review at the U.S. Supreme Court.
CB: Hawaiʻi Supreme Court Clears Way For $4 Billion Maui Wildfire Settlement - Honolulu Civil Beat -- The court’s three-page order blocks a legal strategy by the insurers of the homes and businesses lost in the blaze to sue Hawaiian Electric Co., the state and other parties who shared blame for the fire’s origin and spread…. The ruling is a victory not just for HECO — the utility suggested it might have declared bankruptcy if the court had ruled against it — but also for fire victims and their lawyers. About a third of the $4.04 billion settlement is expected to go to the victims’ lawyers.
SA: Maui wildfire settlement clears Hawaii Supreme Court hurdle -- BEST COMMENTS:
"...the Court expressly rejected the Mainland lawyers' “make whole doctrine” argument.... This leaves the door open to insurers intervening into the current and future proceedings to prove their claims pursuant to HRS 663-10...."
“…now comes the crisis in property insurance - much higher insurance premiums and insurers ceasing to write property insurance….”
“Caving in to political pressure, the Court has departed from decades of prior precedent. E.g., State Farm Fire and Casualty Co. v. Pacific Rent-All, Inc., 90 Hawai‘i 330, 978 P.2d 768 (1999); Moranz v. Harbor Mall, LLC, 150 Hawai’i 387, 502 P.3d 488 (2022).
“The Court has also ignored the statutory requirements of Section 663-10 of the Hawaii Revised Statutes to protect subrogation rights BEFORE any settlement payment and dismissal of any lawsuit: “§663-10 Collateral sources; protection for liens and rights of subrogation. (a) In any civil action in tort, the court, before any judgment or stipulation to dismiss the action is approved, shall determine the validity of any claim of a lien against the amount of the judgment or settlement by any person who files timely notice of the claim to the court or to the parties in the action. The judgment entered, or the order subsequent to settlement, shall include a statement of the amounts, if any, due and owing to any person determined by the court to be a holder of a valid lien and to be paid to the lienholder out of the amount of the corresponding special damages recovered by the judgment or settlement.”
“Subrogation is a venerable creature of equity jurisprudence, "so administered as to secure real and essential justice without regard to form[.]" H. Sheldon, The Law of Subrogation § 1, at 2 (1882) (footnote omitted). "It is broad enough to include every instance in which one party pays a debt for which another is primarily answerable, and which, in equity and good conscience, should have been discharged by the latter[.]" Id. (footnote omitted). It "is defined by Sheldon to be `the substitution of another person in the place of a creditor, so that the person in whose favor it is exercised succeeds to the rights of the creditor in relation to the debt.'" Kapena v. Kaleleonalani, 6 Haw. 579, 583 (1885). When subrogation occurs, "[t]he substitute is put in all respects in the place of the party to whose rights he is subrogated." Id. In effect, he "steps into the shoes" of the party. See Putnam v. Commissioner, 352 U.S. 82, 85, 77 S. Ct. 175, 176, 1 L. Ed. 2d 144 (1956); A. Windt, Insurance Claims *162 and Disputes § 10.05, at 409 (1982); Black's Law Dictionary 1279 (5th ed. 1979).”
Peters v. Weatherwax, 69 Haw. 21, 29, 731 P.2d 157, 162 (1987).
“Until today.
“But more importantly, by becoming the ONLY jurisdiction in the country to reject subrogation rights against tortfeasors, the Court has exacerbated our insurance crisis by forcing homeowners and other insurers to exit the Hawaii market (the exit has reportedly already begun for some insurers from the threat of this ruling), condemning us all to astronomical insurance premiums for those that choose to remain.
"That is exactly what the greedy mainland lawyers have done in California. With their $1 billion plus contingency fee windfall preserved, they are laughing at us, all the way to the bank....
"...the Court’s Order itself opens the door to insurers filing HRS 663-10 Notices of Liens in the current Second Circuit proceedings before Judge Cahill. Each complete or partial denial of such a lien is open to appeal. For this reason, I am not so sure that this ruling will ultimately speed up payments to the plaintiffs.
"HMSA liens were once common in personal injury lawsuits and the bane of local plaintiff attorneys’ existence before the law was changed to make it harder for HMSA to pursue them."
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MAUI WILDFIRES SETTLEMENT WILL MOVE FORWARD ACCORDING TO HAWAI‘I SUPREME COURT DECISION
News Release from Office of Hawaii Attorney General, February 10, 2025
HONOLULU – In a unanimous decision today, the Hawaiʻi Supreme Court ruled against insurance companies and in favor of the state, to allow the $4 billion dollar Maui wildfires litigation settlement to move forward.
Insurance companies had refused to enter into a settlement with the defendants, claiming that they had the right to make claims against the defendants, including the state of Hawaiʻi, to recoup what was paid out to the fire victims, a process referred to as subrogation.
All five Hawai‘i Supreme Court justices said in their written order that the exclusive remedy, under HRS 663-10, is for the property and casualty insurer to request the money paid out to be reimbursed by the insured. The settlement monies from the defendants will go directly to fire victims rather than to the insurance companies.
“As Governor of Hawai‘i, I welcome the state Supreme Court’s unanimous decision to uphold the $4 billion Maui wildfire settlement. We reached this historic settlement for the wildfire survivors on Maui through a collaborative effort to do what is right (pono), for our people, consistent with our values,” said Governor Josh Green, M.D. “The settlement came exactly one year after the fire occurred, when most felt it could take five years or more to reach agreement. Today’s decision will help our people heal much sooner, as we continue to rebuild and recover.”
Governor Green went on to say, “Going forward I will continue to work with all parties, including those who opposed the settlement, to expedite our critical recovery as a people and a state.”
“We are very pleased that this hurdle to resolving the claims of the fire victims has been cleared,” said Attorney General Anne Lopez.
The case was remanded to the Circuit Court of the Second Circuit for further proceedings. The Supreme Court decision can be found here.
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Statement of Hawaiian Electric Industries (HE) on Hawaii Supreme Court Decision Relating to Insurance Subrogation Claims in Maui Wildfire Tort Litigation
Form 8K: 0000354707-25-000005
Hawaiian Electric Industries (NYSE: HE) announced:
On February 10, 2025 the Hawaii Supreme Court issued a decision regarding the Reserved Questions posed to them by the Second Circuit Court on Maui (case no. 2CSP-23-0000057). The Hawaii Supreme Court’s decision provides clarity regarding the rights of insurers filing subrogation claims in the Maui wildfire tort litigation. The decision clarifies that, once the settlement becomes final, insurers seeking to recover amounts paid to settling plaintiffs cannot separately sue defendants, including for amounts beyond the settlement agreed to by the plaintiffs and defendants.
HEI views the Hawaii Supreme Court’s decision as favorable. The Court’s decision aligns with the Company’s and plaintiffs’ positions on key questions that arose from insurers’ challenges to the settlement agreements reached in the Maui wildfire tort litigation.
“We are pleased that today’s decision aligns with our arguments and was issued on an accelerated timeline. The decision helps move the settlement forward, bringing increased certainty to those who suffered loss in the Maui wildfires, while providing more clarity for our company’s path toward reestablishing our financial stability,” said Scott Seu, HEI president and CEO. “The resolution of the reserved questions reinforces the durability of the global settlement, and will help us fulfill our commitment to thousands of individuals and our community as the collaborative work to rebuild continues,” said Seu.
The Hawaii Supreme Court’s decision on the reserved questions was a key step in finalizing the settlement agreements reached in the Maui wildfire tort litigation, and the Second Circuit Court on Maui can now consider the settlement agreements for final judicial approval. The Hawaii Supreme Court is expected to issue a written opinion providing further detail on its decision in the coming weeks.
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BBB: Hawaii High Court Shields Charter, Hawaiian Telcom over Maui Fires
SA: Hawaiian Electric welcomes ruling on wildfire settlement | Honolulu Star-Advertiser -- “We see the court’s order as a win for Hawaiian Electric, but legislation providing visibility into how future wildfires will be dealt with is needed before the stock can move significantly higher,” Jefferies analysts said.