Hawaiian Electric, the utility responsible for the deadly Maui wildfire in August, is facing significant challenges in covering the damages from the fire. The utility recently filed a document with state regulators revealing that it has $165 million in general liability insurance, which may be used to compensate victims and repair damages. However, this amount is only a small fraction of the estimated $5 billion in damage claims. As more people join the lawsuits against Hawaiian Electric, the claims continue to grow.
The filing provides insight into the utility’s approach to wildfire risk, indicating that Hawaiian Electric may be severely underinsured. Experts note that it is common for utilities to have low amounts of liability insurance, but Hawaiian Electric’s insurance policies may have additional limitations. For instance, there is a sublimit of just $5 million for fire damage to equipment, compared to a sublimit of at least $200 million for damage from named wind storms.
Critics argue that the utility’s risk assessment and mitigation efforts were inadequate. While Hawaiian Electric did identify wildfire as a danger to West Maui in its 2023 Wildfire Mitigation Plan, experts say it downplayed the need for proactive measures, such as a power shut-off safety plan, and underestimated the flammability of the grasses around its infrastructure. They believe that the utility should have better analyzed its risks when obtaining insurance, considering the prevalence of high winds and highly flammable grasses in the area.
Hawaiian Electric’s decision not to adopt a policy to preemptively shut off power in the face of red flag and high wind warnings has also come under scrutiny. The utility cited negative customer reactions to Pacific Gas & Electric’s practice of shutting off circuits in certain areas to prevent wildfires as a reason for not adopting a similar approach. However, experts argue that the utility failed to fully acknowledge the risk of ignition and the potential consequences of not taking proactive measures.
The underinsurance issue raises concerns about how Hawaiian Electric will cover the mounting damage claims if found liable for starting the fire. The utility’s financial stability has already been questioned, and the potential liabilities from the fire could push it towards insolvency. It remains to be seen how Hawaiian Electric will address these challenges and provide adequate compensation to the victims of the Maui wildfire.