Maui Fire Settlement cases move toward victim payouts

Parties to a proposed wildfire settlement in Maui have agreed to dismiss a federal class action lawsuit, advancing the process toward relief for victims of the August 2023 fires.

It remains to be seen whether U.S. District Court Judge Jill Otake will allow the lawsuit to be dismissed.

The fire victims want the federal case dismissed. That includes Hawaiian Electric Industries, Kamehameha Schools and others charged in the Maui fire case. A document filed Tuesday makes their position clear.

On Wednesday, Otake issued an order stating that not all parties in the lawsuit had signed the dismissal document as required by civil case rules. She gave the parties one day to correct the technical error and resubmit.

In the meantime, the global insurance industry wants to keep the federal case open, and Otake has not ruled out the insurers’ request.

The outcome could have a significant impact on a final settlement and payment for the victims.

Why is the federal case important?

The major action related to the fires is in state court, but a protracted federal class action could delay and possibly nullify the proposed settlement.

After a series of defeats in state court, insurers are looking to use the federal courts to file lawsuits HECO and others turned out to be the cause the fire, which killed 102 people and destroyed much of Lahaina.

The insurers, including some 140 companies from around the world, have argued that the federal courts provide a more impartial forum for them than the state court of Hawaii. In response, attorneys for the settlement parties accused the insurers of “egregious forum shopping” in seeking relief from Otake after their losses before state judges.

At the beginning of 2025, the Supreme Court of Hawaii is expected to rule on an issue that could help the parties finalize the proposed settlement.

But the federal case is a wild card. Federal rules of civil procedure recognize that state courts sometimes provide local parties with a home court advantage. That’s why the rules grant federal courts jurisdiction on a variety of matters normally within the jurisdiction of state courts, including class actions.

Who benefits from a home advantage?

In this case, the potential for home field advantage for the Hawaiian sides is clear.

Giant companies, including insurers from as far away as London and Zurich, are fighting individual fire victims in Maui and some of Hawaii’s oldest institutions, including HECO, Hawaiian Telcom and Kamehameha Schools, are trying to get money from victims. Gov. Josh Green of Hawaii helped negotiate the proposed settlement and has criticized the insurers.

The insurers have essentially argued that they should have a say in whether the federal case is dismissed. And Otake still hasn’t rejected that argument.

In practice, a sustained federal case could mean more than a supposedly fairer platform for insurers. It could also mean a quagmire of federal litigation and appeals that could unravel the proposed settlement.

Why are the insurers holding out?

Insurers have paid out more than $2.3 billion in claims to date to Maui fire victims they want to be able to sue the parties responsible for the fire to make up for their losses. Such so-called subrogation cases are common in mass disaster litigation.

But the settlement parties want the courts in Hawaii to drop the subrogation cases.

If that happens, instead of being able to sue those responsible for starting and fueling the fires, insurers would have to go after the fire victims – essentially suing their own customers – to recoup the insurance losses .

Whatever happened to the proposed $4.04 billion ‘global settlement’?

Reports of a global settlement were greatly exaggerated. It is true that Hawaiian Electric Industries and its subsidiaries have agreed to pay $1.99 billion and Kamehameha Schools $872.5 million. The state of Hawaii is expected to contribute approximately $800 million. And the rest of the $4.04 billion will be covered by parties such as Spectrum and Hawaiian Telecom.

The victims and their lawyers agree that this is enough.

But that plan is temporary. It specifically requires “any subrogation claimant” to abandon its claims before the proposal can become a final settlement. And the insurers won’t give up on those claims.

Still, the proposed settlement gives the settling parties another option: They could obtain an order from a court requiring the insurers to recover their losses from the victims of the fire rather than from the parties responsible for starting the fire.

That’s what’s happening now. HECO, Kamehameha Schools, the State of Hawaii, the victims and other settlement parties have asked Maui Circuit Court Judge Peter Cahill for such an order. The insurers claim the order would violate Hawaiian law. And those are the key questions Cahill has presented to the Hawaii Supreme Court.

When will victims be paid – and how much is the settlement amount?

The Hawaii Supreme Court is expected to issue a ruling in early 2025.

If Otake dismisses the federal case and the Supreme Court rules on the settlement victims and defendants, the proposed settlement could become final and the process of allocating the settlement proceeds could begin.

There are still questions to be answered. For example, it is not clear how to address victims who opt out of the settlement. It is also not known how much each victim will receive and when. Another problem is legal costs for victims’ attorneys, which could eat up $1 billion of the $4.04 billion settlement.

However, if the Supreme Court rules in favor of the defendants, the current proposed settlement will likely fail, leaving victims back in limbo unless insurers agree to a settlement.

civil Beat’s coverage of Maui County is supported in part by a grant from the Nuestro Futuro Foundation.