Lawyers for Maui fire victims are pressing to sign up additional clients as a tentative $4.04 billion settlement moves closer to becoming final.

Maui Circuit Court Judge Peter Cahill on Monday entered a written order limiting the ability of insurers to file separate lawsuits against the various defendants accused of starting the fires or allowing them to spread. The defendants include the state of Hawaii, Maui County, Hawaiian Electric Industries and Kamehameha Schools. 

The order is a blow to the insurance industry, which has paid out more than $2.3 billion in claims so far and which expects insured losses to total more than $3 billion. The order also is a key prerequisite for converting the tentative deal outlined in a term sheet into a definitive settlement agreement.

While the settlement still is technically not final, lawyers for wildfire victims are pushing forward with advertisements as if the agreement were a done deal.

Don Guzman, a former Maui County Council member who represents several hundred fire victims in lawsuits, said numerous questions still need to be answered, including issues such as how the $4 billion will be divided among victims. But he said it’s “miraculous” to have something close to a definitive agreement a year after the catastrophic fires. 

Litigation over wildfires in California, by contrast, took three to five years to resolve, Guzman said.

“That’s great that we have a number,” Guzman said of the $4.04 billion pledged by the defendants.

Jesse Creed, who serves as one of four liaison counsel for the plaintiffs, said that, while the settlement might not be technically final, the defendants are obligated to pay when certain conditions are met. He said it was important at this point in the process for victims to have lawyers to protect their interests.

“Parties are obligated, so as a law firm, we believe it’s important for people to have the best representation they can get as part of the claims process,” Creed said. “And there really shouldn’t be much delay.”

But whether the insurance industry allows Cahill’s order to stand unchallenged remains to be seen.

“We are reviewing the order and will be evaluating our legal options going forward, but we hold firm in our position that the parties responsible for causing the Lahaina wildfires must be held accountable,”
Vincent Raboteau, liaison counsel for the subrogation plaintiffs, said in a statement.

In cases of negligence, it’s standard procedure for insurers to file lawsuits against negligent wrongdoers to recoup money paid out as claims to policyholders who suffered losses. In such subrogation actions, the insurers essentially step into the shoes of the victims and seek damages from the negligent wrongdoers. 

The Maui fires were no different. Earlier this year, the global insurance industry, including more than 140 companies, filed a subrogation suit in Honolulu state court before Judge Dean Ochiai, seeking unspecified damages from the state, county, HECO, Kamehameha Schools and other defendants.

While the lawyers for the individual victims agreed to settle their claims for $4.04 billion, the insurers didn’t agree to drop their subrogation suits. They remained the holdouts, with, for practical purposes, the power to stop the settlement from happening. 

Cahill’s order strips the insurers of that power, and Ochiai indicated last week that he will defer to Cahill. Instead of pursuing subrogation claims, the insurers will have to seek reimbursement from policyholders.

Gov. Josh Green, who was instrumental in brokering the settlement, continued to urge the insurance industry to back down and not appeal Cahill’s order.

“We reached a master settlement so that the people of Lahaina can heal,” Green said Tuesday. “No one should stand in the way of that, especially not mainland insurance attorneys and their CEOs. Judge Cahill made that clear and I think he’s right.”

Meanwhile, lawyers for the victims were proceeding with the work of documenting claims. Creed said even a seemingly simple case of someone having a home destroyed requires significant work, such as documenting property title, the parties who lived there, the home’s contents and the condition of the home before and after the fire and the cost to rebuild. 

“If it’s a business loss, it gets way more complicated,” Creed said.

Another issue is how to divide the settlement amounts among the various victims, who are expected to number in the thousands. More than 640 suits have been filed so far, with each representing multiple plaintiffs, and the number grows daily.

“It is going to be answered,” Guzman said. “It just hasn’t been answered yet.”

Governor Calls On Lawyers To Lower Fees

How much the plaintiffs’ lawyers will be compensated for their work also remains to be seen. While defense lawyers usually are paid by the defendants and get paid regardless of a case’s outcome, plaintiffs lawyers generally work on a contingency fee. That means the lawyers work for free until there’s a settlement or jury award and then take a percentage.

Guzman said the contingency fee is typically about 33%. That would mean a collective paycheck of more than $1 billion for the plaintiffs’ lawyers based on the $4.04 billion settlement. Guzman said Cahill has indicated he will ask the lawyers to reduce their contingency fee to around 25%.

“I would be agreeable to have that discussion and that being on the table,” Guzman said. “And I think it will be.”

Green also has asked the lawyers to contribute to the victims by taking a pay cut.

“We have asked everyone to keep their fees as low as possible to maximize the recovery of those who lost everything in Lahaina,” Green said Tuesday. “The settlement path will result in far less work and legal cost, paving the way for faster recovery and much more resources for those who are suffering.”