Maui Fire Settlement Stalled as Insurers Fight Payout Rules

Maui Fire Settlement Stalled as Insurers Fight Payout Rules \ Newslooks \ Washington DC \ Mary Sidiqi \ Evening Edition \ Hawaii’s Supreme Court is reviewing an insurance dispute that could derail a $4 billion settlement for victims of Maui’s 2023 wildfire, the deadliest U.S. fire in over a century. Insurers want the right to sue defendants separately to recoup payouts, while victims’ attorneys argue this could destroy the deal. The court’s decision will determine how and when victims receive compensation.

Maui Fire Settlement: Quick Looks

• Historic Tragedy: The August 2023 wildfire in Lahaina killed over 100 people and caused $5.5 billion in damages.
• $4 Billion Settlement: Seven defendants, including Hawaiian Electric, agreed to a payout to avoid bankruptcy.
• Insurance Dispute: Insurers seek separate lawsuits to recover $2.3 billion already paid to victims.
• Court Decision Pending: Hawaii’s Supreme Court ruling could either finalize the deal or send it back to trial.
• Potential Delays: A U.S. Supreme Court review could further stall payments to victims.

Hawaii’s Supreme Court Case Puts $4 Billion Maui Fire Settlement at Risk

Deep Look

The Hawaii Supreme Court is now at the center of a high-stakes legal battle over a $4 billion settlement for victims of the 2023 Maui wildfire, the deadliest U.S. wildfire in over a century. The case could determine whether insurance companies can independently sue the defendants, a move that plaintiffs fear could derail the entire settlement and delay much-needed compensation for victims.

While the settlement deal was announced last summer, hundreds of insurance companies are refusing to accept the terms, arguing that they should be allowed to recover billions in payouts directly from the alleged wrongdoers—primarily Hawaiian Electric, which has been blamed for sparking the devastating blaze.

The state’s highest court heard oral arguments on Thursday, but a ruling remains pending, leaving victims and their families in limbo.

Background: The Deadly 2023 Maui Fire and Legal Fallout

On August 8, 2023, a catastrophic wildfire tore through Lahaina, a historic town in Maui, killing over 100 people and destroying thousands of properties. The fire caused an estimated $5.5 billion in damages, making it the deadliest wildfire in the U.S. in over a century.

In the aftermath, hundreds of lawsuits were filed against entities accused of contributing to the disaster. The main defendant, Hawaiian Electric, was blamed for sparking the blaze due to allegedly failing to shut down power lines during high winds. Other defendants in the lawsuits include:

• The State of Hawaii
• Maui County
• Kamehameha Schools, the largest private landowner in Hawaii

Fearing that Hawaiian Electric could face bankruptcy, attorneys for the victims pushed for a swift settlement rather than years of litigation.

Settlement Reached—But Not Without Issues

Just before the one-year anniversary of the fire, Hawaii Governor Josh Green announced that seven defendants had agreed to a $4 billion settlement to compensate thousands of victims.

While attorneys acknowledged that $4 billion would not be enough to cover all losses, they argued that it was the best possible deal, considering Hawaiian Electric’s financial limitations.

“They need every penny to restitch the fabric to bring the community back together,” said attorney Jesse Creed, who represents the victims.

However, insurance companies immediately objected, insisting that they should have the right to pursue their own legal claims against the defendants.

Insurance Companies Push Back, Threatening the Settlement

Legal Dispute Over Subrogation

At the heart of the dispute is subrogation, a common insurance practice where insurers seek reimbursement from liable parties after paying out claims.

• Insurers argue that without subrogation, they would be forced to absorb billions in losses, leading to higher premiums for policyholders.
• Victims’ attorneys counter that allowing subrogation claims could derail the settlement, as defendants would face additional lawsuits beyond the $4 billion agreement.

Judge Peter Cahill, overseeing the case, had previously ruled in favor of the victims, blocking insurers from separately suing the defendants. Instead, insurers would need to seek reimbursement from the $4 billion fund.

This decision angered insurers, which collectively have already paid over $2.3 billion in claims and expect to pay at least $1 billion more. A group of 200 property and casualty insurers are now challenging Cahill’s ruling before the Hawaii Supreme Court.

What the Hawaii Supreme Court Must Decide

The justices must now determine whether Hawaii’s laws on health insurance subrogation also apply to property and casualty insurance. If the court rules in favor of insurers, the decision could invalidate the settlement, forcing victims back into lengthy court battles.

Hawaii’s Governor: Insurers Are “Unfairly Profiting”

Hawaii Governor Josh Green has been vocal in denouncing subrogation, arguing that insurance companies are prioritizing profits over victims.

He pointed out that when insurers make large profits without disasters, they don’t refund policyholders—but when disasters strike, they seek repayment.

“It’s fundamentally unfair, and they call it subrogation,” Green said in a statement referenced in court filings.

Insurers Defend Their Position

Insurance companies, however, argue that they are being unfairly villainized.

• Attorney Vincent Raboteau, representing insurers, stated that his clients are not standing in the way of victim compensation but instead are trying to ensure that the true wrongdoers are held accountable.
• Insurers say they promptly paid claims, allowing victims to begin rebuilding their homes and businesses.
• They argue that their investigations are costly and time-intensive, and that they should not bear the financial burden if other parties were responsible for the disaster.

What Happens Next? When Will Victims Be Paid?

The Hawaii Supreme Court has not set a timeline for its ruling, but justices indicated they will decide as soon as possible.

If the court sides with the victims, the $4 billion settlement could move forward, triggering an administrative process to distribute funds.

However, if the court rules in favor of the insurers, it could destroy the settlement agreement, sending victims back to square one—facing years of litigation and uncertainty.

Furthermore, whichever side loses may appeal to the U.S. Supreme Court, potentially prolonging the case even further.

For now, the victims of the 2023 Maui wildfire remain in limbo, waiting for a definitive ruling that will determine whether they receive their long-awaited compensation or face continued legal battles.

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