In August 2023, a rapidly spreading wildfire swept across parts of the Hawaiian island of Maui, killing 102 people and devastating the coastal town of Lahaina. Property damage losses from the wildfire alone are estimated to exceed $3 billion.
The injuries and damage wrought by this wildfire have spurred multiple lawsuits seeking to hold various parties liable for either causing or exacerbating the effects of the fire. A principal defendant in these lawsuits is Hawaiian Electric Company (HECO), which is alleged to have been responsible for the initiation of the wildfire. Specifically, a report by the County of Maui, supported by the Federal Bureau of Alcohol, Tobacco, Firearms and Explosives, issued a report concluding that a fallen HECO power line set dry grass on fire the morning of August 8, 2023, producing a smoldering ember that flared up because of hurricane-force winds later in the day. The fire then grew into a raging wildfire that ultimately engulfed the town of Lahaina. Although firefighters were on the scene initially and were thought to have controlled the blaze, a piece of smoldering material was blown into a nearby gully, and the strong winds from the hurricane reignited the material and spread it into a full-fledged wildfire.
In all, hundreds of lawsuits have been filed against defendants such as HECO, Hawaiian Telecom, the State of Hawaii, the County of Maui, West Maui Land Company, Spectrum/Charter Communications, Kamehameha Schools, and others for their alleged culpability in the death and destruction resulting from the Maui wildfire. For example, the Kamehameha Schools is a defendant on the grounds that it allegedly failed to cut back combustible grass on its property in the area of the downed power line, even though it allegedly knew the grass was a fire hazard. The plaintiffs in these lawsuits include not only the injured persons and businesses suffering losses, but also their first-party insurers and reinsurers that have paid property damage coverage claims and are now seeking subrogation against the defendants as potentially responsible parties. Although the injured party plaintiffs have entered into a proposed $4 billion state-court class action settlement of their claims against the defendants, the insurers suing in subrogation have not agreed to the settlement, and their objections are currently being weighed by the Hawaii Supreme Court.
The plaintiffs’ factual allegations and causes of action against the various defendants sound in negligence, gross negligence, and recklessness, among other claims. The plaintiffs allege that the defendants were well aware of the significant risk that a rapidly spreading wildfire might occur well before the fateful Maui wildfire took place in August 2023, and yet they failed to take proactive steps to prevent such a catastrophe. Specifically, the plaintiffs contend that the defendants were not only cognizant of the serious risk of wildfires on the island, particularly in the summer, when wild grasses dry out and become flammable, but they were also alleged to have been aware of constant threat of hurricanes and their attendant high winds, which can turn a minor brush fire into an uncontrollable wildfire.
Several allegations in one of the class-action complaints summarizes the alleged malfeasance committed by the various defendants, as follows:
7. And, despite extensive and specific knowledge about the great risk of wildfires on Maui in 2018 and 2019, Defendant County of Maui (“the County Defendant”) took no action to eliminate or reduce identified wildfire risk factors in advance of the Lahaina Fire. During the fire, the County also failed to sound sirens, which would have prompted evacuations and mitigated the overwhelming loss of life, personal injuries, and emotional distress.
8. The combination of the HEI Defendants’ failure to deenergize their power lines and to replace their old and vulnerable wooden power poles; the Telecommunications Defendants’ destabilization of the HEI Defendants’ wooden power poles; the Private Landowner Defendants’ and State Landowner Defendants’ failure to maintain and manage the vegetation on the land where the fire started and spread; and the County’s failure to implement reasonable, non-costly wildfire mitigation measures before the Lahaina Fire and to sound sirens warning people of the rapidly approaching Lahaina Fire all contributed to cause this unprecedented disaster. Together, these failures caused loss of life; serious injuries; destruction of thousands of homes and businesses; displacement of thousands of people; and damage to, and the destruction of, many of Hawai‘i’s treasured historic and cultural sites. This fire marks the most destructive — and deadliest — human-made disaster in Hawai‘i history.
Boiled down to their essence, the allegations against the defendants in the Maui wildfire class-action lawsuits alleged that, not only were the defendants negligent, but they were also reckless because their actions and/or inactions demonstrated a conscious disregard for the serious risk of damage and injury that resulted from the Maui wildfires.
Until recently, a Hawaii defendant seeking liability insurance coverage for claims of “recklessness” and “conscious disregard” may very well have faced a reservation of rights, or even an outright coverage denial, by its liability insurer on the grounds that such claims do not fall within the definition of an “occurrence” under a general liability policy because claims of that nature do not allege an “accident.” Indeed, insurers faced with claims from Hawaiian policyholders have argued that, under Hawaii Supreme Court precedent such as AIG Haw. Ins. Co. v. Est. of Caraang and its progeny, if an underlying plaintiff alleges that a policyholder engaged in an intentional act and the reasonably foreseeable result of that act was some type of injury or damage, then the resulting injury or damage was not an “accident” – and hence not an “occurrence” under a general liability policy. See Caraang, 74 Haw. 620, 636, 851 P.2d 321, 329 (1993); see also Hawaiian Holiday Macadamia Nut Co. v. Indus. Indem. Co., 76 Hawaii 166, 170, 872 P.2d 230, 234 (1994).
Fortunately for Hawaii policyholders, the Hawaii Supreme Court’s recent decision in Aloha Petroleum Ltd. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 557 P.3d 837 (Haw. 2024), clarifies the state of Hawaii law regarding what constitutes an “accident,” and hence an “occurrence,” under a general liability policy—and the court reaffirmed its prior decision in Tri-S Corp. Western World Insurance Co., 110 Hawaii 473, 135 P.3d 82 (2006), that allegations of “recklessness” and “conscious disregard for risk of injury” can constitute an “accident” and an “occurrence” for purposes of triggering coverage under a general liability policy.
The Aloha Petroleum case involved insurance coverage for the climate change liability lawsuits that have been filed by the City and County of Honolulu and the County or Maui against Aloha Petroleum Ltd. and other producers and sellers of fossil fuels. With regard to these lawsuits, Aloha had sought a defense from the AIG-affiliated insurers, National Union and American Home, under the duty-to-defend provisions of the policies they had issued to Aloha in the 1980s through the 2000s. The AIG insurers had denied coverage and refused to defend Aloha on multiple grounds—the primary one being an assertion that the facts alleged in the complaints in these climate change lawsuits did not allege an “occurrence,” defined as an “accident” under the policies at issue.
In support of the AIG insurers’ assertion of no “occurrence” or “accident” being alleged in the climate change lawsuits, the AIG insurers focused on allegations in the complaints that the defendants knew about information from trade industry groups and publicly available scientific data regarding the harmful effects of the emission of greenhouse gases into the atmosphere from the combustion of fossil fuels. The AIG insurers also focused on the complaints’ allegations that defendants knew their products were defective and dangerous and yet they acted with conscious disregard for the probable dangerous consequences of the use of their products. In short, the AIG insurers argued that the factual allegations in the climate change lawsuit complaints were tantamount to allegations of recklessness, and that injury or damage resulting from recklessness cannot be considered an “accident” or “occurrence.”
Aloha vigorously denied the factual allegations in the climate change lawsuit complaints. Moreover, Aloha responded to the AIG insurers that, even allegations of gross negligence or recklessness in the complaints could still constitute an “occurrence” under a general liability policy because such allegations do not amount to intentionally caused injury. Aloha argued that the Hawaii Supreme Court’s most recent statement on the issue—which was set forth in the 2006 Tri-S decision, considered whether the allegations of a defendant’s conscious disregard for the safety of a worker could be covered under a liability policy, and the court held that such allegations can constitute an “occurrence” and also that coverage is not precluded by the “expected and intended” exclusionary language in the policy at issue. Tri-S Corp. v. W. World Ins. Co., 135 P.3d 82, 103 (Haw. 2006).
Aloha’s coverage lawsuit against the AIG insurers was filed in federal district court for the District of Hawaii. Following limited discovery, the parties filed cross motions for partial summary judgment on the duty to defend. Aloha emphasized that, under Hawaii law, there only need be a “remote possibility” of coverage when reviewing the allegations of a complaint against a defendant-policyholder for an insurer’s duty to defend to be triggered.
In considering the parties’ cross motions for summary judgment, the district court judge (Hon. Jill Otake) issued an order certifying two questions to the Hawaii Supreme Court, one of which was whether, for an insurance policy defining a covered “occurrence” as an “accident,” can an accident include “recklessness?” Aloha Petroleum, Ltd., v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, 690 F.Supp.3d 1168, 1172 (D. Haw. 2023). (The other certified question related to whether greenhouse gases were pollutants, as contemplated in pollution exclusions in certain of the AIG Insurers’ policies.)
The Hawaii Supreme Court accepted the certified questions, invited briefing and argument, and then issued its Opinion on October 7, 2024. In a win for Hawaii policyholders, the court rejected the AIG insurers’ contention that recklessness cannot be an “occurrence” under a general liability policy and held that an “accident” includes reckless conduct. Aloha Petroleum, 557 P.3d at 840 (Haw. 2024).
In explaining its decision that allegations of reckless conduct and “conscious disregard” for the probable outcome of such conduct can nonetheless be an “accident” and thus an “occurrence” triggering coverage under a liability policy, the court explained that, even if an insured perceives the risk of harm by engaging in certain conduct, the harmful result of that conduct is “accidental”—and not “expected or intended”—unless the insured intended to cause harm or expected harm with “practical certainty.” Hence the possibility, or even probability, of an insured’s conduct causing injury was not sufficient to preclude coverage because the happening of such injury was still a fortuity. Id. at 852. This decision by the court places Hawaii law in line with the majority of other jurisdictions regarding the very high standard that must be satisfied by an insurer to deny coverage based on a contention that injury or damage was not caused by “accident” and hence not the result of an “occurrence.”
Importantly, in rendering this decision, the Hawaii Supreme Court clarified certain of its prior decisions that had used imprecise language in articulating why certain policyholders were denied coverage on grounds that the injuries they had allegedly caused were not accidental. Although those decisions spoke of the relevant injuries having been the reasonably foreseeable result of the insured’s intentional acts, they did not mean that mere reasonable foreseeability of harm—which would exist even in the event of negligence—precluded coverage for an occurrence. Rather the Supreme Court clarified that, in those cases—which typically involved intentional physical assaults or intentional breaches of contract—the insured acted with an intent to harm others. Aloha Petroleum Ltd., 557 P.3d at 849.
