Hawaii Supreme Court Paves the Way for Maui Fire Settlement to Proceed

 The settlement reached in the Maui fire cases appears to be a step closer to becoming a reality after the Hawaii Supreme Court issued its Order answering three reserved questions posed by the circuit court. In the Matter of the Petition for the Coordination of Maui Fire Cases, SCRQ-24-0000602 (Order Feb. 10, 2025). The Order is here.    

    Wild fires destroyed the Maui town of Lahaina on August 8, 2023. Several lawsuits were filed against various entities allegedly responsible for the catastrophic destruction left by the fires. The various lawsuits were consolidated within a Special Proceeding by the circuit court. The cases went to mediation and a global settlement was reached on August 2, 2024. The terms provided for payment by the defendants of $4.036 billion to the plaintiffs.

    The insurers (Subrogation Plaintiffs) who had paid various claims submitted by their policyholders were not parties to the settlement. The Global Settlement required the following:(i) the Subrogation Plaintiffs’ exclusive remedy for any Maui fire claims would be asserting liens, if any, against their policyholders for their shares of the aggregate settlement amount, and (ii) the Subrogation Plaintiffs would be barred from bringing or maintaining any Maui fire claims against the underlying defendants.

    The Global Settlement also required the settling parties within ninety days, or as soon thereafter as possible, to obtain judgments, orders or opinions dismissing with prejudice all claims by the Subrogation Plaintiffs against the paying defendants. All such orders were to be “final and unappealable.” Finally, the Global Settlement required each plaintiff who received payment “to indemnify the Defendants with respect to any individual liens asserted by any subrogated insurer against the individual plaintiff arising out of or relating to the Maui Fires.”

    The underlying plaintiffs argued that Haw. Rev. Stat. § 431:13-103 (a) (10), which they contended limited the subrogation rights of an insurer to reimbursement of amounts paid from a policyholders’ recovery from the tortfeasor. The statute barred an insurer from “[r]efusing to provide or limiting coverage available to an individual because the individual may have a third-party claim for recovery of damages.” Id. Therefore, the insurers were barred from “limiting” coverage by withholding consent to settlement of its policyholders’ claims or by competing with its policyholders for limited funds.

    The underlying plaintiffs further argued that the Subrogation Plaintiffs' exclusive remedy was to seek reimbursement for liens under Haw. R. Stat. § 663-10. The statute provides,

In any civil action in tort, the court, before any judgment or stipulation to dismiss the action is approved, shall determine the validity of any claim of a lien against the amount of the judgment or settlement by any person who files timely notice of the claim to the court or to the parties in the action. The judgment entered, or the order subsequent to settlement, shall include a statement of the amounts, if any, due and owing to any person determined by the court to be a holder of a valid lien and to be paid to the lienholder out of the amount of the corresponding special damages recovered by the judgment or settlement . . .

Haw. R. Stat. § 663-10. Lien is defined to mean “a lien arising out of a claim for payments made or indemnified from collateral sources, including health insurance or benefits, for costs and expenses arising out of the injury which is the subject of the civil action in tort . . .” Id. (emphasis added). The plaintiffs argued that the statute applied not only to health insurance or benefits, but also to “any civil action in tort”, which included all of the Maui fire cases. Therefore, when a plaintiff settled directly with the tortfeasor, Haw. Rev. Stat. §§ 431:13-103 (a) (10) and 663-10 limited the subrogation rights of the insurer to reimbursement from the plaintiff’s recovery.

    On August 19, 2024, the circuit court entered an Order Granting Individual Action Plaintiffs' Motion for Orders Regarding Operation of Haw. Rev. Stat. 663-10. Accordingly, any subrogation claimant's exclusive remedy for any Maui fire claim was Haw. Re. Stat. 663-10. To meet the requirements of the Global Settlement to make the ruling final and unappealable, the plaintiffs moved the circuit court to submit to the Hawaii supreme Court reserved questions. 

    The Hawaii Supreme Court agreed to answer the reserved questions. Briefing was submitted, and a hearing was conducted on February 6, 2025. The Supreme Court issued its Order on February 10, 2025, largely agreeing with the circuit court and finding that the Subrogation Plaintiffs' remedy was through liens under Haw. Rev. Stat. 663-10, and not subrogation.

    The questions presented and the Supreme Court's responses are as follows: 

    Question 1:     Does the holding of Yukumoto v. Tawarahara, 140 Haw. 285, 400 P. 3d 486 (2017) that limited the subrogation remedies available to health insurer to reimbursement from their insureds under HRS § 663-10 and barred independent actions against tortfeasors who settled with the insureds extend to property and casualty insurance carriers?

The Court answer yes. "[U]nder Haw. Rev. Stat. 431:13-103 (a), the lien provided for under Haw Rev. Stat. 663-10 (a) was the exclusive remedy for a property and casualty insurer to recover claims paid for damages caused by a third-party tortfeasor in the context of a tort settlement between an insured and the tortfeasor." 

Question 2:     Is a property and casualty insurer’s subrogation right or reimbursement prejudiced by its insured’s release of any tortfeasor when the settlement documents and release preserve those same rights under HRS § 663-10?

Here, the Court answered in the negative. "[T]he statutory lien under HRS 663-10 is the exclusive remedy for a property and casualty insurer in the context of a tort settlement . . ."

Question 3:     Under the circumstances of the Maui Fire Cases and the terms of the “Global Settlement,” does the law of the State of Hawaii require that insureds be made whole for all claimed injuries or damages before their insurers can pursue a subrogation right of recovery or reimbursement against a third-party tortfeasor?

The Court again answered in the negative, pointing out that in this mass tort case, the Court refused "to apply the made whole doctrine to the statutory lien-claim process established by HRS 431:13-103 (a) (1) and 663-10. Accordingly, the Subrogation Plaintiffs could not pursue their own subrogation actions against the defendants, but mhad to pursue lien rights against their insureds. 

    The Order remanded the case to the circuit court for further proceedings. The Supreme Court retained jurisdiction to enter an opinion and judgment that would follow.