The 2023 Maui Wildfires: An Overview
On August 8, 2023, multiple wildfires ignited across Maui, with the most catastrophic blaze engulfing Lahaina, a historic town on the island’s northwest coast. The fires were exacerbated by dry, gusty conditions created by a strong area of high pressure to the north and Hurricane Dora passing to the south. These factors contributed to the rapid spread of the flames, overwhelming local firefighting resources and leaving residents with little time to evacuate. The Lahaina fire alone resulted in the deaths of at least 102 people, making it one of the deadliest wildfires in U.S. history. In addition to the tragic loss of life, the fires destroyed approximately 2,200 structures, the majority of which were residential homes, and caused an estimated $5.5 billion in damages.
The Crucial Role of Subrogation in the Wake of Disaster
In the aftermath of the wildfires, numerous lawsuits were filed to determine liability and seek compensation for the extensive damages. A significant legal issue that emerged was the concept of subrogation, wherein insurance companies that have compensated their policyholders seek to recover those payouts from third parties deemed responsible for the losses. In this case, insurers aimed to recoup over $2 billion paid to policyholders by pursuing legal action against entities alleged to have contributed to the cause of the fires, such as Hawaiian Electric Company (HECO).
However, a proposed $4 billion global settlement intended to compensate wildfire victims included terms that would bar insurers from pursuing separate subrogation claims. This clause, if upheld, not only strips insurance carriers of their ability to recover losses but also threatens the entire economic framework that subrogation helps maintain.
Subrogation is not just about insurers protecting their bottom line. It is a time-honored legal doctrine designed to ensure that those who are ultimately responsible for causing damage bear the financial consequences—not innocent parties or the insurance system as a whole. When an insurer steps in to pay a claim, contractual subrogation terms within the policy allow that insurer to pursue reimbursement from any at-fault parties. This promotes accountability, discourages carelessness, helps hold down the cost of insurance, and reinforces the fundamental principle that wrongdoers—not policyholders or their insurers—should pay for the harm they cause.
Blowing up the right of subrogation in these cases for the ease and convenience of the parties in litigation disrupts this delicate balance. This means that insurers shoulder a greatly increased burden of paying billions in losses without any avenue for recovery. Moreover, it violates the fundamental constitutional right of parties to contract with one another at arm’s length. Each of the property insurance policies involved in this disaster contractually provided the insurance company with a right of subrogation. It is a fundamental policy provision that was taken into consideration when setting the insurance policy premiums in those policies. If subrogation were to be waived or done away with, the premiums would have been significantly higher. Worse still, the loss of subrogation rights could result in insurers withdrawing from the Hawaii property market altogether, leaving residents with fewer choices, higher premiums, or no access to affordable property insurance at all.
The Matter of Maui Fire Cases Decision
On March 17, 2025, the Hawaii Supreme Court issued a pivotal ruling in the consolidated case known as Matter of Maui Fire Cases, 2025 WL 830004. The court addressed whether, under Hawaii law, insurers who had compensated policyholders for wildfire-related damages retained the right to pursue subrogation claims against third parties independently of the global settlement.
In a move that alarmed many in the insurance and legal communities, the court held that, given the specific circumstances of the Maui fires and the terms of the proposed settlement, the insurers’ subrogation rights were effectively extinguished. The ruling emphasized the importance of expediting relief to the victims and maintaining the integrity of the comprehensive settlement agreement. As a result, insurers were directed to seek reimbursement through the mechanisms established within the settlement rather than through separate legal actions.
This decision, though well-intentioned, sets a troubling precedent. It prioritizes expedience over fairness, and expedience over the legal and economic mechanisms that ensure justice in large-scale loss scenarios. The court’s approach suggests that the needs of wildfire victims and the rights of insurers are inherently in conflict, when in fact, they are aligned. Subrogation does not delay recovery for victims—it facilitates it, by encouraging swift payment by insurers who know they may later seek redress from those at fault.
Subrogation Chances after Supreme Court Decision
The Supreme Court’s decision means insurers can’t directly pursue Hawaiian Electric Industries, or other responsible parties, following the global settlement. Instead, they must rely on the terms of their property insurance policies and pursue liens directly from any recovery made by their insureds. Insurers will now face the subrogation Kraken known as the “made whole doctrine.”
Hawaii’s Made Whole Doctrine
The “made whole doctrine” is an equitable common law principle stating that an insurer’s right to subrogation arises only after the insured has been fully compensated for their losses. In simpler terms, policyholders should be “made whole” before insurers can reclaim any funds by asserting the liens referred to by the Supreme Court. In its decision, the Hawaii Supreme Court addressed the applicability of the made whole doctrine to the Maui wildfires. It said that Hawaii had not previously adopted this doctrine in the context of property and casualty insurance. In its deliberations, the court declined to apply the made whole doctrine to this mass tort case, emphasizing that it was not part of Hawaii’s established law in such contexts. In Hawai’i, the right to contractual subrogation, as opposed to equitable subrogation, does not depend on principles of equity. Therefore, when subrogation claimed by an insurer is based on a contract, the policy’s subrogation provisions seem to constitute the sole measure of its rights. State Farm Fire & Cas. Co. v. Pacific Rent-All, Inc., 978 P.2d 753 (Haw. 1999).
Following the Supreme Court’s decision, the subrogation prospects for property insurers that have paid billions as a result of the Maui fires have been significantly clouded, though not entirely foreclosed. The court declined to apply the “made whole” doctrine to this case, so insurers may seek to enforce their contractual subrogation rights, as created by the policies, hoping they remain enforceable despite the global settlement framework. For now, insurers appear to be in a subrogation limbo: their rights exist on paper but are materially constrained in practice, setting up a high-stakes test for the resilience of subrogation in mass tort contexts.
The Broader Implications of Undermining Subrogation
The Supreme Court’s decision means insurers can’t directly pursue Hawaiian Electric Industries, or other parties responsible for the fire and who agreed to fund the settlement. Instead, the insurers will have to settle for the lesser remedy of pursuing liens against policyholders who get a cut of the $4 billion — the “insurer’s exclusive remedy” to recoup money from its insureds.
This ruling sends a chilling message to insurance carriers: that in times of widespread disaster, the rules may change, and foundational principles like subrogation may be sacrificed in the name of expedience or public sentiment. This undermines insurers’ willingness to underwrite risk in high-exposure areas like Hawaii.
Stripping subrogation rights doesn’t just affect an insurer’s “pocketbook.” It affects the solvency of the industry, the cost of premiums, the accessibility of coverage, and ultimately, the reliability of the insurance safety net upon which millions of Americans depend. If insurers cannot recover losses in cases where clear liability exists, they will be forced to adjust premiums accordingly—or worse, cease offering coverage altogether in risky jurisdictions.
Furthermore, eliminating subrogation rights erodes the principle of deterrence. When utilities, manufacturers, or other potential defendants know they will not face direct financial consequences for their negligence, they may be less incentivized to take preventative safety measures. Subrogation enforces accountability not just retrospectively, but proactively.
Maui’s Long Road to Recovery—and the Need for Legal Balance
The Hawaii Supreme Court’s decision in the Matter of Maui Fire Cases has significant implications for the $4 billion settlement distribution and the broader recovery efforts on Maui. By limiting insurers’ subrogation rights, the court aimed to streamline the compensation process for victims, ensuring that funds are distributed without additional legal delays. While the intent may be noble, the long-term consequences of undercutting subrogation are likely to be felt by Hawaii residents and insurers alike.
Meanwhile, efforts continue to support the recovery of Maui. Residents in affected areas have participated in programs like Firewise, which focus on creating defensible spaces around properties and reducing combustible vegetation. Hawaiian Electric has also outlined plans to strengthen its power grid to reduce wildfire risks, with a proposed $450 million initiative that includes infrastructure upgrades and vegetation management.
Despite these efforts, surveys conducted by the University of Hawaii Economic Research Organization (UHERO) show that many fire survivors continue to face financial hardship and housing insecurity. The need for a stable, functioning insurance system that can support recovery—not just once, but in future disasters—is more critical than ever.
Restoring the Balance
The Maui fires were an unprecedented tragedy, and the desire to swiftly compensate victims is both understandable and essential. But in pursuing that goal, we must not discard the legal and economic principles that make comprehensive compensation possible. Subrogation is not a loophole—it is a cornerstone of fairness in the insurance system.
The Hawaii Supreme Court’s decision in Matter of Maui Fire Cases may expedite short-term relief, but it threatens long-term stability. If insurers are denied their rightful ability to pursue subrogation, the repercussions will echo beyond the courtroom—into the boardrooms of underwriters, the bank accounts of policyholders, and the lives of future disaster victims.
True recovery requires not just rebuilding structures, but preserving the legal frameworks that ensure justice and sustainability in the face of catastrophe. Subrogation is one of those frameworks. It must not be lost in the ashes.
Katherine Sandoval is the partner in charge of MWL’s Irvine, California office. For questions about pursuing subrogation in wildfire claims, contact Katherine at ksandoval@mwl-law.com.
