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A state judge on Friday asserted authority to clear a last obstacle to a broad settlement of more than 600 lawsuits related to the Lahaina wildfires, marking another step toward a resolution of the cases. 

Maui Circuit Court Judge Peter Cahill stopped short of breaking the logjam in an order issued on Friday. But the judge said he has the power to do so.

And he scheduled a status conference for Aug. 13 to sort out the apparent cause of the obstacle: A dispute between wildfire victims who have filed suits seeking compensation for damages suffered because of the fires on one side and, on the other side, insurance companies that have paid out fire claims to policyholders.

The dispute centers on who will have priority over settlement proceeds: the victims or insurers.

Plaintiffs allege Hawaiian Electric Industries, its utility subsidiaries, the State of Hawaii, Maui County, Kamehameha Schools and others were negligent in starting the fires or allowing them to spread. The defendants have agreed to pay more than $4 billion to settle the lawsuits, sources familiar with the talks have said.

“The essential purpose of the conference is to explore the path forward so that a ‘global settlement’ can not only be discussed but achieved,” Cahill wrote in his order.

Cahill’s order comes at the end of five tense weeks. It started in late June with a weeklong round of mediation sessions in Los Angeles overseen by Louis Meisinger and Daniel Buckley of Los Angeles and Keith Hunter of Honolulu. Parties were said to have made progress, and by mid-July, rumors that a settlement was close spawned  that a deal was all but done.

With parties to the mediation bound by confidentiality orders, Gov. Josh Green eventually stepped in on July 18 to quell the rumors and say there was no deal. 

Green also hinted at the cause of the delay, saying there were “some parties” outside Hawaii that were asking for too much in settlement talks and thus preventing a deal. Although Green didn’t say who that was, two prominent plaintiffs lawyers, Jesse Creed and Cynthia Wong, filed court documents indicating the insurers were the ones holding things up.

While all of this was going on, Cahill’s order explains, the Maui court was staying out of the fray, letting the mediators work toward a settlement. Although Cahill was aware of the news reports, the order says, the judge hadn’t gotten word of “any settlement let alone one of a global nature” from any party or lawyer in the mediation. Nor had the court gotten word of an impasse from the mediators.

Still, Creed and Wong’s court filings along with sources familiar with the mediation pinpointed the nature of the dispute — a fight with insurers over potential settlement proceeds. The plaintiffs say fire victims should be paid first.

Insurers paid out $2.34 billion as of the end of June, and total insurance losses are expected to top $3.2 billion, according to the latest data from the Hawaii Insurance Division. Insurers that pay claims typically can seek reimbursement from parties responsible for the damage. So in January more than 140 insurers filed a separate lawsuit in Honolulu circuit court seeking reimbursement for the insurance claims they have paid.

Echoing the victims’ suits, the insurance suit says parties including HECO, Hawaiian Telcom, Kamehameha Schools and others were negligent in allowing fires to start and spread. As a consequence, the so-called subrogation suit says, the defendants should have to reimburse the insurers.

But victims are concerned the insurers could end up eating up most of a settlement if the insurers have a priority to be paid first, leaving little compensation for victims who were uninsured or underinsured.

Earlier this week, Wong wrote Cahill asking for him to resolve the thorny questions concerning subrogation. In a rare agreement between the litigants, HECO backed its opponent’s request in a separate letter to Cahill.

With Friday’s order, Cahill essentially agreed to step in. He said that the Maui court has jurisdiction to resolve the matter, even though the insurers have a separate subrogation suit in Honolulu. 

“Despite the filing of a separate lawsuit pending in a different circuit, THIS COURT FINDS AND CONCLUDES that it has the jurisdiction, authority and legal duty to review and resolve subrogation liens in the event of settlement any Maui Fire Case,” Cahill wrote.

“Because the subrogation claims are inextricably tied to the just, efficient and economic determination of all the Maui Fire Cases,” he continued, “this Court has the authority to bring together all necessary persons and entities to achieve that result.” 

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