Insurance companies with claims against Hawaiian Electric tied to hundreds of Maui wildfire lawsuits largely prevailed Friday in court on an issue that could affect when and how they share damage payments with fire victims.
A state Circuit Court judge handling more than 650 fire victim damage cases ruled against expediting an appeal to the Hawaii Supreme Court sought by attorneys for victims as part of their effort to finalize a tentative $4 billion settlement with Hawaiian Electric and other defendants.
Peter Cahill, chief judge of Hawaii’s 2nd Circuit Court on Maui, denied the appeal at least in part because it was sought by attorneys for fire victims who wanted Hawaii’s high court to validate a ruling that Cahill made in their favor.
“I’ve never heard of a prevailing party appealing, unless is was (for) attorneys’ fees or costs,” the judge said.
Cahill’s earlier ruling barred more than 160 insurance companies, which have paid $2.3 billion in claims to victims who lost homes and other property in the Aug. 8, 2023, fires and expect to pay out another $1 billion, from seeking compensation directly from Hawaiian Electric, which the insurers allege is liable for the fire that destroyed most of Lahaina town.
Instead, the insurers can seek to recoup from policyholders amounts from settlement and insurance payments that make policyholders more than whole for their losses.
Attorneys for fire victims fear that certain terms of the settlement could lead to the $4 billion deal being terminated.
Those terms require that if insurers don’t waive their direct claims, then Cahill’s ruling that bars those claims has to be final and unappealable within nine months. But insurers don’t have to appeal within that time frame.
Some parties to the litigation in court Friday acknowledged that Cahill’s ruling one way or the other on the appeal motion could influence the balance of leverage for insurers to make a deal with attorneys representing victims to share some of the $4 billion upfront and not seek to recover anything later from policyholders.
Gov. Josh Green on Wednesday, during a Honolulu Star-Advertiser editorial board meeting, called attorneys for some of the insurance companies, mainly State Farm Insurance, ruthless and terribly greedy. But he also described a “significant possibility” that the insurers agree to a “much more modest” piece of the $4 billion settlement, which would avoid further clashes in court.
Green said 15% of the settlement, or $600 million, has been offered and that insurance company representatives wanted 40%, or $1.6 billion.
“If they agree, then it’s over,” Green said, referring to the 15% offer. “There’s a little less resource for the plaintiffs (fire victims), but at least it goes forward fast.”
If the settlement is terminated and litigation drags out, Green said it could lead to the bankruptcy of Hawaiian Electric and Maui County.
Under the tentative $4.037 billion deal, Hawaiian Electric would contribute $1.99 billion, while the state and Kamehameha Schools would each contribute $872.5 million. Maui County would not pay anything, but would release its own claims against other defendants, according to Green, who also said Spectrum Oceanic LLC and Hawaiian Telcom would contribute about $300 million.
Adam Romney, an attorney representing the insurers, told Cahill during Friday’s hearing that it wasn’t fair for a settlement between defendants and fire victims to bar direct claims by the insurance carriers.
The insurers filed their own lawsuit solely against Hawaiian Electric in 1st Circuit Court on Oahu seeking recovery of insurance payments for Maui wildfire claims. The companies are not direct participants in the more than 650 Maui fire cases before Cahill and a special proceeding overarching all that litigation.
“They can go settle the case if they want,” Romney said, referring to attorneys for fire victims. “God bless them. They can settle for any dollar figure they want. But what they can’t do is release our claims.”
Romney also said it isn’t right to approve an appeal sought by the same attorneys to essentially uphold Cahill’s earlier ruling to bar claims by the insurers.
Romney called that an unusual novel procedure and said it actually could add time to resolve the Maui wildfire litigation.
“This procedure just doesn’t make sense in terms of what they’re trying to accomplish,” he said. “This will not speed resolution. … It’s creating a mess that has be be cleaned up later, and resolving that mess and taking all those threads apart will ultimately take just as long if not longer than doing this the right way one time with a final appealable order.”
Jesse Creed, an attorney representing plaintiffs in the court’s special proceeding to deal with a settlement, suggested during Friday’s hearing that the insurers just want to increase what they can get from the sum defendants are willing to pay and at the expense of fire victims.
“Why are they objecting to an order that would facilitate the settlement?” Creed asked. “The reason they did that is because they want to tank the settlement. This is a cynical tactic by them to get leverage — to get either more money because they think there’s more money, or to not give what they say is the lion’s share of the recovery to the plaintiffs. This is a very cynical effort by the insurance companies to prevent a condition from being met that would allow for $4 billion of funds to go into Lahaina and rebuild Maui.”
Steven Tom, a private attorney helping represent the state, supported the motion for an appeal and noted there is nothing to force the insurers to file their own appeal in the near term.
“We need that trigger,” he told the judge, also acknowledging that the special proceeding that deals with the settlement is a unique circumstance.
Said Cahill, “This whole process is unusual. There’s no question about it.”
In denying the motion to appeal, Cahill said, “I just see no basis for it.”
Cahill did grant a motion made by attorneys representing fire victims to ask the Hawaii Supreme Court to give its advice on the legality of Cahill’s earlier ruling to bar direct claims by the insurers against Hawaiian Electric. But this might not have as much impact on finalizing the $4 billion settlement.
