New information has come to light regarding Hawaiian Electric’s ability to compensate victims and families affected by the deadly wildfires that swept through parts of the island of Maui two months ago. According to reports, the electric company holds a yearly general liability insurance policy that covers approximately $165 million, as stated in documents from state regulators in Hawaii. However, research firm Capstone estimates that the potential claims for damage and loss caused by the wildfires could reach as high as $4.9 billion.
Hawaiian Electric has taken responsibility for the fire that occurred on August 8, admitting that its equipment was the cause. The company was able to halt the flow of electricity to its aboveground power lines, but it denies any responsibility for the subsequent fire that devastated the area known as Lahaina later that same day.
This revelation has raised concerns about Hawaiian Electric’s preparedness and risk assessment. Mike Kelly, a California wildfire attorney who led a committee dedicated to examining payouts to wildfire victims, criticized the company for not adequately considering the level of risk it faced when choosing its insurance coverage. He questioned whether the company had taken all necessary precautions to protect its business, stockholders, and customers, and whether it had assessed the cost of covering potential liabilities.
Interestingly, Hawaiian Electric’s own 2023 Wildfire Mitigation Plan acknowledged wildfire as a significant danger in West Maui, where Lahaina is located. This acknowledgment further raises questions about why the company did not take more proactive measures to minimize the risk.
This situation highlights the importance for companies to thoroughly evaluate their potential risks and liabilities and to choose insurance policies that adequately cover them. The devastating wildfires in Maui have demonstrated the potential consequences of failing to do so, as Hawaiian Electric now faces the daunting challenge of compensating victims and families with a liability that far exceeds its insurance coverage.
Moving forward, it is crucial for organizations, particularly those operating in areas prone to natural disasters, to reassess their risk management strategies and invest in comprehensive insurance coverage that takes into account worst-case scenarios. Protecting the interests of all stakeholders, including businesses, stockholders, and customers, must be a top priority to avoid situations like the one currently faced by Hawaiian Electric.
As this situation unfolds, it serves as a reminder of the devastating impact that natural disasters can have on communities and businesses alike. It also emphasizes the importance of proactive risk management and the need for companies to prioritize the safety of their operations and the communities they serve. By taking these steps, organizations can better navigate and mitigate potential damages and liabilities, ultimately safeguarding their futures.