INSURING HAWAII HOMEOWNERS

Without the insured entering into a settlement agreement, there is nothing to assert a lien against and a property insurer may still bring an independent subrogation action against the at-fault parties.

The Hawai‘i Supreme Court made it clear that the exclusive remedy for property insurers to seek reimbursement for claims paid to their insureds is by asserting a lien only when there is a settlement between their insured and the defendant(s) (at-fault parties).

On March 31, 2025, Judge Cahill ordered property insurers to disclose limited information about their insureds’ insurance claims to BrownGreer PLC, a legal services firm located in Richmond, Virginia. The specifics regarding the disclosure of claim information were included in the April 14, 2025, notice of a potential lien that was sent to impacted policyholders. BrownGreer is required to keep the disclosed claim information confidential.

Judge Cahill ordered the disclosure of this claim information in order to match individual plaintiffs who received payment from an insurance claim they made and are represented by an attorney. Not all individual plaintiffs who have retained an attorney made an insurance claim. Similarly, not all those who have filed an insurance claim arising out of the Lahaina wildfire are represented by an attorney or are seeking recovery from the at-fault parties. The matching process will help identify which individual plaintiffs have received payments from their insurer for their property loss.

Property insurers are committed to helping their customers and the people of Maui recover from the wildfire. Property insurers responded immediately to the tragedy by putting resources and emergency funding directly into the hands of their customers. Property insurers have paid out more than $2.5 billion to policyholders for their property claims and expect to pay $1 billion more. These funds make their way into the community as policyholders rebuild and invest in labor and materials.

In addition to paying for covered losses, property insurers have donated millions of dollars to local nonprofits to support Maui’s recovery, including the American Red Cross, Maui Food Bank, Convoy for Hope, Salvation Army Hawaiian and Pacific Islands Division, Habitat for Humanity, and the Hawai‘i Community Foundation Maui Strong Fund. Insurers have also contributed time and materials to support a wide range of community recovery efforts.

Insurance subrogation is a legal process that allows an insurance company to pursue an at-fault party that caused a covered loss. This process enables the insurer to recover the amount of the claim it paid to the policyholder for the loss caused by the at-fault party.

When describing the importance of insurance subrogation, the Hawai‘i Supreme Court has held that subrogation “plays an important role in insurance law” because it holds the legally responsible party responsible for the harm caused to the insured. State Farm Fire & Cas. Co. v. Pac. Rent-All, Inc., 90 Haw. 315, 328 (1999).

The party responsible for causing the loss “pays exactly the damages it would ordinarily pay” in the absence of insurance coverage. Moranz v. Harbor Mall, 150 Haw. 387, 400 (2022).

There are several steps to the insurance subrogation process:

• Investigation: When a policyholder suffers a loss and files a claim, their insurance company investigates the cause of the loss.
• Claim Payment: The insurance company pays for damages or injuries covered under the policy.
• Pursuing the At-Fault Party: After compensating their policyholder, the insurance company stands alongside – not in front of – other individuals seeking compensation for damages caused by the at-fault party. The insurance company does not try to be first in line to any recovery, nor do they seek recovery beyond what they expect to pay in claims.
• Recovery: If successful, the insurance company recovers monies from the at-fault party, which helps control expenses and the overall cost of insurance for customers.

The litigation includes more than 190 property insurers who have paid property damage claims caused by the Lahaina wildfire. After initiating an investigation, property insurers identified three groups of parties responsible for causing the Lahaina wildfire, including, but not limited to:

• Hawaiian Electric: a publicly traded regional electrical utility;
• Hawaiian Telcom and Charter Communications: telecommunications providers; and
• Kamehameha Schools: Hawaiʻi’s largest private landowner.

It is important to note that the property insurers have NOT filed any claims for an independent right of recovery or reimbursement against the State of Hawai‘i or the County of Maui.

Property insurers have paid out more than $2.5 billion to policyholders for their property claims and expect to pay $1 billion more, for a total of approximately $3.5 billion. These are the only damages property insurers are seeking to recover. Contrary to media reports, property insurers have never demanded “$65 billion, then $30 billion, $12 billion, and then $7 billion in the settlement.”

Contrary to media reports, property insurers are NOT blocking a settlement between the victims of the Lahaina wildfire and the at-fault parties. Property insurers support every claimant’s independent right to pursue their claims and reach a settlement with the at-fault parties if they so choose. What property insurers do not support is a global settlement that eliminates the property insurers’ independent rights of insurance subrogation.

Insurance subrogation is a crucial mechanism that allows insurers to recover costs from an at-fault party, ensuring that the financial burden does not fall unfairly on the policyholder or their insurance company.

Subrogation helps facilitate lower insurance premiums for consumers. Without subrogation, at-fault parties responsible for losses would avoid responsibility for the harm they caused. Those costs or damages would be passed along to consumers in the form of higher premiums or limitations on the availability of insurance coverage.

A successful subrogation recovery from an at-fault party in a preventable disaster – like the Lahaina wildfire – helps control expenses and the overall cost of insurance for all residents in Hawai‘i.

Subrogation also leads to greater accountability and social responsibility. Shifting losses from one industry (e.g., the utility industry) to the insurance industry does nothing to help prevent future wildfires. Only when those parties that cause a loss are held responsible can meaningful change be realized.

No, property insurers subrogate only those losses caused by an at-fault party. If a natural catastrophe, such as a hurricane, were to strike Hawai‘i and cause widespread property damage, subrogation would not come into play.

Because of the complexity of the legal issues and the potential for enormous plaintiff attorney fees, the property insurers believe judicial oversight and fact-finding are vital and in the best interest of all claimants, especially the wildfire victims.

Property insurers believe that any settlement process must be fair and transparent for all involved parties.

The proposed settlement seeks to eliminate the property insurers’ subrogation claims, which could have significant negative impacts on both the future cost and availability of property insurance for all residents in Hawai‘i.

Property insurers believe a rush to settlement without all the facts is not in the best interest of any claimant. Only when all the facts are known can a fair and equitable settlement be reached.

Property insurance covers loss or damage to tangible property, such as a building and its contents, due to events like fire, theft, or a natural disaster. Liability insurance, on the other hand, covers legal costs if a person or business is sued, protecting them from claims involving third parties.