The Hawaii Public Utilities Commission initiated a sweeping inquiry of Hawaiian Electric Co. this week, and, among other things, ordered the utility to reveal by Monday any liability insurance the company has available to cover legal claims related to the Aug. 8 fires on Maui.

The fires killed at least 115 people and destroyed 2,200 structures in Lahaina, with estimated damage of more than $3 billion. 

Hawaiian Electric faces dozens of lawsuits alleging the company’s downed power lines ignited the fires, and plaintiffs lawyers have been left to guess how much money would be available for victims if the company is found liable. The suits involve property and personal injury claims.

With Hawaiian Electric facing potentially massive liability, the company’s stock has plummeted since the Aug. 8 wildfires. Bond rating agencies have downgraded the company’s debt to junk bond status, meaning Hawaiian Electric will have to pay higher interest rates to borrow money at a time when the company faces a massive rebuilding project. The company in August announced it would suspend its dividend for the first time in more than 120 years.

On Friday, Moody’s Investors Service reported “early indications are that Hawaiian Electric’s potential liabilities in a worst-case scenario may be larger than its $2.4 billion of book equity.” 

Meanwhile, in a likely sign of things to come, a property insurance company has joined the mob going after Hawaiian Electric. In its complaint, DB Insurance Co. Ltd. asserts the utility should pay the insurer back “for losses paid to its insureds, including, but not limited to, property damage (including home, auto and personal property damage), loss of use, loss of profits, and other losses and/or damages arising out of the Lahaina Fire.”

If the various plaintiffs prevail against Hawaiian Electric, it will likely set up a fight between insurers like DB and the individual victims.

Against this backdrop of Hawaiian Electric’s financial struggles and fights over money, the amount of Hawaiian Electric’s liability insurance coverage is particularly important.

“Understanding how much insurance any defendant has available to cover claims in litigation is critical to understanding a big part of what victims and survivors can seek to recover down the line,” said Graham LippSmith, a plaintiffs lawyer who is seeking class action certification for a suit filed against Hawaiian Electric. 

Hawaiian Electric declined an interview request on Wednesday; the company has until Monday to respond to the PUC.

Questions about Hawaiian Electric’s insurance coverage are just one subject of the PUC’s nine-page letter, which seeks detailed information about a proposed plan, which Hawaiian Electric submitted in 2022, to strengthen its electric grids to mitigate risks associated with climate change.

Formally called the “Climate Adaptation Transmission and Distribution Resilience Program,” the plan includes strategies to prevent and lessen risks due to wildfires, along with other specific activities like hardening transmission lines and poles and removing hazardous trees.

The utility submitted the plan to the PUC in June 2022, initiating an approval process that routinely takes months or years to complete. The Maui fires have brought heightened attention to the proposal. 

The PUC’s questions to Hawaiian Electric’s affiliated utilities seek to clarify how the Maui fires might change the company’s proposed plan. PUC counsel Mark Kaetsu’s questions revolved around a central information request: “Please describe whether any of the Companies’ resilience efforts have been modified or updated based on the Maui Wildfires. If so, please explain in detail.”

These include detailed questions about how the company identifies routine versus non-routine risk mitigation and how the company restores and replaces assets as the assets wear out.

$95 million Federal Grant May Be Available

The PUC’s letter also seeks information about a potential award of $95 million from the U.S. Department of Energy, which Hawaiian Electric can use to implement the Climate Adaptation Transmission and Distribution Resilience Program, which the company initially estimated would cost $189.7 million.

In a letter to the PUC dated Tuesday, Hawaiian Electric wrote that the Department of Energy grant and PUC approval are interrelated.

“The DOE desires to know whether the Companies will receive Commission approval to satisfy the Companies’ IIJA matching fund requirement and, if provided, what, if any, conditions may be placed on such approval,” Kevin M. Katsura, Hawaiian Electric’s director for regulatory non-rate proceedings wrote. “The Companies also understand that the Commission is interested in knowing what the conditions of DOE grant award may be. As follows, the Companies respectfully recommend a path forward to effectively balance the respective interests and concerns.”

While the $95 million grant could have an impact on easing costs to ratepayers, Hawaiian Electric’s insurance coverage remains a major question mark. And it’s not just liability insurance. 

Quoting Hawaiian Electric, the PUC notes in its letter that Hawaiian Electric’s overhead and underground transmission and distribution systems are not insured against loss or damage. The company asserted that there’s limited availability of such insurance on the market and that “the premiums are cost prohibitive.” 

The PUC wants to know what Hawaiian Electric did “to determine that insuring these assets and associated losses are ‘cost prohibitive.’” 

The PUC also asked, “Please clarify and identify whether the Companies have any other forms of insurance (e.g., commercial general liability, umbrella, errors & ommissions) that may help cover or offset costs associated with damage to the Companies’ property and/or third-partry property or personal injury.”