Attorney: State Should Demand Faster Insurance Payouts to Fire Victims

Hawai'i's insurance regulator needs to ask insurance companies to speed up initial payouts to policyholders who lost property in the August wildfires on Maui, a Wailuku attorney said Tuesday.

State Insurance Commission Gordon I. Ito should ask all insurance companies that have issued policies in Hawai'i to "automatically pay out 100% of coverage limits for loss of contents/personal property" to those on Maui who were affected by the August fires, attorney Lance D. Collins wrote in a Sept. 5 letter to Ito.

Insurance companies should also make these payments without asking affected residents for itemized lists of damaged property or other proof, Collins added in his letter. Insurance companies typically require such lists prior to approving the majority of money to be paid out to policyholders.

"In our view, this is a burden the people of Lāhainā should not be required to bear while the community continues with disaster relief efforts," Collins wrote in his letter to Ito.

Collins added that there's no consistency to the experiences Maui policyholders who lost property in the August wildfires are getting. "Some people are having an easy time," Collins said in an email Tuesday. "Some not."

Collins is a member of the Mālama Law Group, which represents property owners, renters, businesses and families who lost loved ones in the August fires on Maui. Collins also represents two West Maui residents who filed suit against state water officials, alleging that they removed a deputy water official following the Aug. 8 Lāhainā fire without adhering to Hawai'i's Sunshine Law.

The fires that began Aug. 8 around Maui damaged or destroyed 19 homes Upcountry and devastated Lāhainā. The death toll from the Lāhainā fire stands at 115, though nearly 400 individuals are still unaccounted for, County of Maui officials said Sept. 1. The Lāhainā fire damaged or destroyed more than 2,200 structures, 86% of which were residential, according to the county.

Estimated rebuilding costs for Lāhainā are in excess of $5.5 billion, according to county officials.

A spokesperson for the state Department of Commerce & Consumer Affairs, which oversees the Hawai'i Insurance Division, did not immediately respond to a request for comment.

On Aug. 16, Ito issued Commissioner's Memo 2023-3A, which called on insurance companies to work with insured residents who lost their property in the August wildfires, but stopped short of specifically asking for speedier and more substantial initial payouts.

"We are asking insurers to refrain from cancelling or non-renewing policies, to grant a grace period for premium payments, and to work with their insureds," Ito said in an Aug. 21 DCCA news release. "Communication between insurers and insureds is key to the recovery process. Therefore, we are asking the insurance companies to work with their insureds to make sure their coverage continues during this difficult time for a period of 60 days or longer."

In recent years, other municipalities have begun trying to ease the burden on policyholders following disasters. In June 2022, Colorado Governor Jared Polis signed a law that raised the initial payouts insurance companies must make to those who lost properties in fires from 30% of the value of what they lost to at least 65%, according to Colorado Newsline. These initial payouts must be made within 30 days and prior to the insurance company receiving an inventory, according to Newsline.

The Colorado bill originally called for initial payouts to be at least 80% of the value of what was lost, but amendments during the legislative process lowered the payout percentage to 65%, Newsline reported.