As victims injured in the 2023 Maui wildfires begin to line up to receive legal settlements, a big question looms: Will health insurers who paid for their medical care try to lay claim to some of that money? 

The answer could carry a price tag in the tens or even hundreds of thousands of dollars, per victim.

Some legal experts think survivors are likely to be hit with medical liens on their settlements from the state’s $175 million One ʻOhana Fund and from the separate, much larger, $4 billion global settlement nearing completion in a Maui court that involves thousands of individuals and businesses. 

Trying to claw back settlement money would be controversial, and it remains to be seen which insurers will pursue that strategy. But the state’s largest private health insurer, Hawai‘i Medical Service Association, hasn’t ruled it out. Christine Hirasa, an HMSA spokesperson, said privacy laws prohibit the insurer from discussing individual claims, but she left open the potential of going after settlement money. 

In an email she said, “HMSA’s rights and obligations are set forth in members’ plan documents, as well as applicable law, which may result in different outcomes from settlement to settlement.”

Others say they won’t go after their injured customers. UHA Health Insurance, founded by professors at the University of Hawai‘i’s John A. Burns School of Medicine, doesn’t plan to pursue claims on settlement money, UHA’s president and chief executive Howard Lee said in a statement. Kaiser Permanente also does not plant to pursue claims, said Tammy Mori Brownfield, a company spokeswoman said. And Gov. Josh Green, who helped craft the One ʻOhana Fund, has instructed the Department of Human Services to waive Medicaid liens on fire victims, said Green’s spokeswoman, Makana McClellan.

The prospect that health insurers might seek to recoup settlement money from fire victims is not idle speculation, said Woody Soldner, a Honolulu trial lawyer who works on injury cases. 

“I’m sure they will,” he told Civil Beat.

An Important Supreme Court Ruling

It was a 2017 Hawaiʻi Supreme Court case involving HMSA and a moped accident that provided the precedent for the current wildfire cases. Soldner was the attorney.

Gregory Yukumoto, a state worker, was cruising along at the intersection of University Avenue and Date Street in Honolulu when Ruth Tawarahara tried to turn left in her SUV. Tawarahara crashed into Yukumoto, breaking both of his legs and his back and causing a brain injury, among other things. Yukumoto won $1.1 million in his lawsuit against Tawarahara, far less than the $4 million he sought.

HMSA sued Tawarahara, trying to recover the $325,824 it had paid for Yukumoto’s medical treatment. HMSA also placed a lien on Yukumoto’s $1.1 million settlement. The Hawaiʻi Supreme Court ruled that a health insurer’s only recourse was to go after the policyholder — Yukumoto, in this case — and not a third party that caused the harm — Tawarahara.

The Hawaiʻi Supreme Court recently applied that legal reasoning to the massive litigation over the Maui wildfire, saying property insurers, who’ve paid out more than $2.3 billion to their policyholders, can’t sue the entities responsible for the fire and its damage — Hawaiian Electric Co. and others. Instead, they have to try to recoup money from policyholders who get settlements.

Hawaiʻi statute limits how much a health insurer can claw back from their policyholder, Soldner explained.

The issue comes down to whether a settlement includes money for medical expenses that were also paid by the health insurer. In such a case, the health insurer would be able to enforce its lien to recoup some or all of the medical claims it paid. The statute effectively prevents the victim from double dipping.

But in some cases, Soldner said, the general damages suffered by the victim — for things such as pain and suffering — are so extensive that the settlement covers only those, leaving nothing for insurers. There is no duplication of payment, and thus no double dipping.

That’s what happened in Yukumoto’s case, according to Soldner: His injuries were so extensive and his suffering so great that HMSA did not seek to enforce the lien.

“They let Mr. Yukumoto proceed with his life,” he said.

But Soldner said he has little doubt insurers will go after settlement money recovered by Maui fire victims by filing liens. That’s such a standard procedure that HMSA has a firm, the Kentucky-based Rawlings Group, Soldner said, for just that purpose.

He said it often strikes clients as counterintuitive to learn that an insurer to which they or their employer paid premiums for years could try to recoup payments for medical claims simply because they suffered an injury caused by a third party.

“The response is usually, ‘I don’t believe that’ or, ‘That’s not fair,'” he said.

Courts will decide what HMSA can get back if it decides to try to recoup its payments, Soldner said.

Medical Liens Could Erode Value Of Settlements

It’s a vital question for Sam Schafer, who described his harrowing ordeal following the Maui wildfire in a detailed statement to the One ʻOhana Fund.

Schafer, 30, was in the process of opening a fitness club when he almost lost his home in the Aug. 8, 2023, Olinda fire in upcountry Maui. The next day, Shafer was extinguishing smoldering hot spots on his neighbor’s property when he felt his feet sink into molten earth that he says was “softer than sand.”

Schafer’s slippers melted, fusing with his badly burned flesh, he wrote. He was airlifted to Honolulu’s Straub Benioff Medical Center Burn Care Unit, where he spent 31 days enduring excruciatingly painful treatments.

Eighteen months later, Schafer said he still suffers intense electrical sensations on his feet. The doctors can’t say whether the pain will ever go away.

“Before the fire, I was a young man in the prime of my life, being physically fit and motivated to open a fitness business,” Schafer wrote. “As a result of my injuries, I’ve suffered not just with impaired functionality, but also permanent visual, internal and psychological scarring that has had a dramatic impact on my daily routine and quality of life.”

But whether Schafer accepts a payout from the One ʻOhana Fund — which pays a maximum of $1.5 million for wrongful death claims, not subject to Hawaii income tax — might depend on whether HMSA goes after the nearly $600,000 in medical treatments it has paid for.

If so, Schafer told Civil Beat, he might be better off hiring a lawyer to file a lawsuit.

“For HMSA to come in and take some of that money, it’s not right at all,” Schafer said. “It puts a bad name on the ‘One ʻOhana’ part of it.”

Maui Judge Must Determine Liens Process

The potential for medical liens to be placed on settlement proceeds is just one of numerous questions still to be sorted out amid a morass of litigation related to the fires. 

Simply distributing the $4.04 billion global settlement — paid by HECO and other parties at fault for the start and spread of the fire — among at least 2,400 victims presents thorny challenges. A team of three mediators and a national claims administration firm bidding for the job of disbursing the fund have requested a whopping $58 million for their work.

There’s also a fight between property insurers, who’ve already paid out more than $2.3 billion, and victims’ lawyers over how those insurers will place liens on individual settlements. Lawyers for fire victims want Maui Circuit Court Judge Peter Cahill to force property insurers to begin filing the liens and to establish a process to resolve them.

Property insurance liens would be similar to medical liens. They would be placed on settlement proceeds to enable the insurers to recoup all or some of what they paid for property damage. As with medical liens, the purpose is to prevent victims from double dipping: obtaining money from the settlement for property damage that duplicates money paid by the insurers for the same damage.

Lawyers representing more than 140 property insurers argue that they can’t file liens until the settlement is finalized because they don’t know the identities of about 2,400 victims who are in line to get a piece of the settlement.

The insurers want Cahill to order the victims’ lawyers to turn over their clients’ names and addresses.

The victims’ lawyers say the best way to identify fire victims is for the insurers to turn over the names of anyone who has received an insurance payout; those lawyers have asked Cahill to force that disclosure. 

Cahill has scheduled a hearing Monday to sort out some of these issues.

Civil Beat’s coverage of Maui County is supported in part by a grant from the Nuestro Futuro Foundation.