Hawaii Supreme Court gives green light to $4 billion Maui fire settlement

The settlement had been held up by insurance companies who had hoped to go after those being held liable for the massive blaze to recoup some of the insurance payments made to Maui homeowners and businesses.

by Michael Gennaro, Candace Cheung, Court House News, February 10, 2025

(CN) — The Hawaii Supreme Court cleared the way Monday morning for the finalizing of a $4 billion settlement meant to resolve hundreds of lawsuits filed in the wake of the deadly Lahaina wildfires, despite protests from insurers who attempted to recoup property damage payouts they've made.

In an unanimous decision issued just four days after justices heard arguments, the state's highest court determined insurance companies cannot block settlement proceedings and sent the issue back to Maui Circuit Court to finalize payments to victims and next of kin of the fires that destroyed the town of Lahaina on Maui and killed over 100 people and left thousands more displaced in 2023.

Maui Circuit Court Judge Peter Cahill had asked the court to resolve questions over if casualty and property insurers should be limited in their ability to pursue reimbursements and independent legal actions against third-parties held liable for damages.

Cahill had asked the high court to determine if 2017's Yukumoto v. Tawarahara — where the Hawaii Supreme Court concluded that health insurers do not have broad, unrestricted subrogation rights against third-party tortfeasors responsible for injuring their insureds and their rights are confined to those established by statute — extended to casualty and property insurers.

Citing state laws controlling insurance reimbursement, the justices that Yukomoto did apply and wrote that "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."

Fire victims, along with the state and other defendants of the lawsuits, including Hawaiian Electric Company — whose equipment widely is accused of causing the fire — originally agreed to the settlement in August.

Proceedings were stalled after a group of over 100 insurers who covered harmed homeowners and businesses attempted to sue the electric utility and other defendants — like the state and Maui County, along with landowners like Kamehameha Schools and telecommunications companies, who are accused of neglecting the proliferation of the quick-burning brush that contributed to the blaze — to recoup some of the nearly $2.3 billion insurers have paid out, a process known as subrogation.

Counsel for the insurance companies said at last week’s hearing that they were not trying to block the settlement, but were merely taking issue with the plaintiffs settling the insurers’ claims as a part of their settlement deal.

Subrogating insurers, the insurance companies argued, have rights that cannot be dismissed or negotiated away by other people or other parties.

Responding to another question from Cahill, the high court also determined that the "made whole" doctrine in Hawaii laws does not apply to the settlement. The doctrine establishes that states an insurer cannot seek reimbursement or subrogation from an insured's recovery from a third party unless the insured has been fully compensated for their losses.

The Supreme Court’s decision figures to have massive ripple effects for Hawaii — the victory for the plaintiffs could come with consequences for the Hawaii insurance market, which is reeling from ongoing risks related to climate change.

If the state Supreme Court had sided with the insurers, Hawaiian Electric has indicated that it could have gone bankrupt and victims could have seen their payments delayed for years.

At the hearing last week, counsel for Hawaiian Electric said that a settlement was the only pragmatic way to handle the thousands of lawsuits filed against the utility and the other defendants.

At the hearing, an attorney for the plaintiffs said that insurers only opposed the settlement because they wished to recoup a bigger piece of the pie, and that Maui needed every dollar of the settlement in order to rebuild Lahaina.

Counsel for the plaintiffs, the consolidated class plaintiffs and the State of Hawaii, Maui County and Hawaiian Electric did not immediately respond to requests for comment on the Supreme Court’s ruling. Counsel for the insurers also did not immediately respond to requests for comment.