Regulators are exerting pressure on Hawaiian Electric to address its liability insurance coverage

Regulators are applying pressure to Hawaiian Electric regarding its liability insurance coverage in the wake of multiple lawsuits related to the Maui fires. These lawsuits have raised concerns about the company’s financial capability to satisfy successful claims.

The Hawaii Public Utilities Commission has initiated a comprehensive inquiry into Hawaiian Electric Co., with a particular focus on the company’s liability insurance coverage for legal claims stemming from the August 8 fires in Maui. These fires resulted in significant devastation, including the loss of over 115 lives, the destruction of 2,200 structures in Lahaina, and estimated damages exceeding $3 billion.

Hawaiian Electric is currently facing numerous lawsuits alleging that its downed power lines were responsible for igniting the fires, encompassing claims related to property damage and personal injuries. Plaintiffs’ lawyers are uncertain about the available funds for victims should the company be found liable.

The financial repercussions for Hawaiian Electric have been severe, with a sharp decline in its stock value since the August wildfires. Bond rating agencies have downgraded the company’s debt to junk bond status, leading to higher borrowing costs. In response, the company announced the suspension of its dividend for the first time in over a century.

Moody’s Investors Service has expressed concerns that Hawaiian Electric’s potential liabilities in a worst-case scenario may surpass its $2.4 billion of book equity. Furthermore, a property insurance company, DB Insurance Co. Ltd., has joined the ranks of those seeking compensation from Hawaiian Electric, claiming reimbursement for losses incurred by insured parties as a result of the Lahaina Fire.

If plaintiffs succeed in their lawsuits against Hawaiian Electric, it could trigger a dispute between insurers like DB and individual victims. Given these financial challenges and legal battles, the extent of Hawaiian Electric’s liability insurance coverage becomes crucial. Understanding the available insurance coverage is essential for assessing the potential recovery options for victims and survivors, according to Graham LippSmith, a plaintiffs’ lawyer pursuing class action certification against Hawaiian Electric.

Hawaiian Electric has not granted interviews regarding this matter, and the company is expected to respond to the PUC’s inquiries by Monday.

In addition to the focus on insurance coverage, the PUC’s nine-page letter to Hawaiian Electric seeks detailed information about the company’s proposed plan to strengthen its electric grids and address climate change-related risks. This plan, known as the “Climate Adaptation Transmission and Distribution Resilience Program,” includes strategies for wildfire prevention, transmission line reinforcement, pole hardening, and tree removal.

The PUC is interested in understanding how the Maui fires may impact this proposed plan and has posed questions regarding risk mitigation, asset maintenance, and replacement strategies. Additionally, the PUC inquires about a potential $95 million grant from the U.S. Department of Energy to support the resilience program, which could influence costs for ratepayers.

However, uncertainties regarding Hawaiian Electric’s insurance coverage remain a significant concern, particularly concerning the lack of coverage for overhead and underground transmission and distribution systems, which the company claims is due to limited availability and prohibitively high premiums. The PUC is seeking clarification on this matter and is also interested in any other forms of insurance that may help offset costs associated with property damage, third-party property, or personal injury.