State high court probes conditions of Maui wildfires settlement

Hawaii Supreme Court justices posed many exacting, and sometimes skeptical, questions Thursday to attorneys in a case pertaining to the validity of a $4 billion deal to settle Maui wildfire litigation.

Justices challenged four lawyers over their respective arguments on whether conditions of the proposed settlement affecting insurance company rights comply with Hawaii law.

It may be weeks before the court's five justices render a decision.

After the almost two-hour hearing, representatives of opposing sides in the case expressed optimism for prevailing.

"We are right on the law, so I think the justices will see that," said Jesse Creed, liaison counsel for numerous attorneys representing more than 17,000 victims of the Aug. 8, 2023, fires that killed 102 people and destroyed most of Lahaina as well as property in Upcountry Maui.

Mark Grotefeld, liaison counsel for close to 200 insurance companies that have paid about $2.3 billion in claims so far to fire victims and expect to pay over $1 billion more, had a similar view. "We know the law is correctly as we have stated it, so we feel very good about our chances here," he said.

A decision by the court could determine whether the proposed settlement, which excludes insurers, can prevent the insurers from obtaining compensation, through litigation, from parties deemed responsible for the fire in an effort to at least partially cover payouts to policyholders. Without this prevention, the existing settlement arrangement falls apart.

The court's decision is also expected to establish a precedent that could apply to future cases pertaining to insurance recoveries and how property and casualty insurance companies operate in Hawaii.

The parties that have agreed to pay $4 billion to Maui fire victims are Hawaiian Electric, the state, Kamehameha Schools, Spectrum Oceanic LLC and Hawaiian Telcom.

Maui Circuit Judge Peter Cahill approved terms of the deal in August and barred insurers from pursuing compensation, through separate litigation, directly from settlement payers.

Under Cahill's ruling, the only way insurers can recover insurance claim payments is to seek court approval to obtain refunds from policyholders for any amount of compensation that exceeds the value of what they lost.

Cahill later agreed to have Hawaii's high court decide three questions in an effort to determine whether his ruling complies with Hawaii law.

Most of Thursday's hearing was spent discussing Hawaii case law, legal principles and notions of equity. Justices posed more than 75 questions to the four attorneys presenting arguments on two sides of the issue.

Creed told the Supreme Court justices that insurers sought reimbursement outside of what's permitted by state law at the expense of fire victims who lost family, friends, homes, businesses and public facilities.

"They lost the core and the fabric of their community, and they need every penny to restitch the fabric and bring the community back together," he said. "Every penny (insurers) take outside of the rules … is one less penny that goes back to rebuilding Lahaina."

Attorney Ginger Anders presented arguments along similar lines for all the settlement payers.

"The settlement is structured to give insurers everything to which they are entitled to under existing Hawaii law," she said.

Adam Romney, an attorney who presented arguments for the insurers, said this group wanted to be part of a settlement but wasn't meaningfully included in dealings with independent mediators who suggested the parties agree to $4 billion as a maximum fair and practicable sum for the settlement payers based on facts and circumstances of the disaster.

"We're not trying to block the settlement," he said. "We would like there to be a settlement that helps everybody and resolves all claims."

Romney said the insurers refused to agree to the $4 billion deal because they were not told how much each entity would pay. After the deal was announced, it was revealed that Hawaiian Electric's share was $1.99 billion, which Romney emphasized is less than what insurers have paid in claims.

Terrence Revere, an attorney representing fire victims through class-action litigation also connected to the settlement deal, said the $4 billion figure is inadequate but was a way to resolve more than 600 lawsuits.

"Nobody was happy with it, but everybody but the insurers felt we have to move on," he told the court.

Under current terms of the tentative settlement, the issue with the insurers must be resolved by May 19 for the deal to become effective.

Chief Justice Mark Reck­tenwald said a decision would be forthcoming.

"Mahalo to all our attorneys for your arguments here today," he said from the bench. "The court will take this matter under advisement. We recognize the urgency of this matter and will issue a decision as soon as possible."