Lahaina Fire Settlement is Caught up in Legal Fight With Insurers

The ashes of last summer’s devastating fire in Lahaina on Maui, which killed 102 people and destroyed the town, were still smoldering when talk turned to how fraught the rebuilding process would be.

Fire victims would need help fast, and Hawaii officials pushed hard for a quick resolution to the avalanche of lawsuits filed against the entities that had caused the fire: the state’s electric utility, a school system and Maui County, among others.

Just days shy of the fire’s one-year anniversary in August, a settlement was announced: Together, those responsible would pay $4 billion to settle more than 600 lawsuits; compensate over 10,000 homeowners, businesses and others; and — critically — keep key institutions, like the utility, solvent.

But getting a deal done that quickly meant adopting an unorthodox approach to the insurance industry’s role in the settlement — one that the industry is challenging. Now, hopes for a timely payout are at the mercy of the courts.

Typically, insurers pay claims and then sue whomever they blame for the damage — like the driver who might have caused a car accident — to recover some of what they paid. In the Lahaina settlement, the insurers are instead expected to seek repayment from the people and businesses they insured. A person who received a share of the $4 billion deal from a pain-and-suffering claim, for example, could have to pay a portion of that to the insurance company.

The industry is balking at this idea, saying it upends a core piece of its business model. Insurers have turned to state and federal courts to try to block the deal, slowing it down and frustrating fire victims and Hawaii leaders.