Hawaii property homeowners are seizing on a authorized shortcut utilized by hearth victims in California to safe compensation from Hawaiian Electrical Industries Inc. for damages following the fires that ravaged Maui.


The technique, which doesn’t require proving negligence, helped push PG&E Corp., California’s largest utility, into chapter 11 and secured victims a $13.5 billion settlement in 2020.

Whereas Hawaiian Electrical and a few analysts have stated this method has by no means been examined in Hawaii’s courts, some property homeowners are already pursuing it. Shares of Hawaiian Electrical plunged 58% final week, amid rising investor concern that the utility could possibly be held answerable for the fires.

Destroyed buildings following a wild hearth in Lahaina, on Aug. 17.

Property homeowners’ success will hinge on a willpower of whether or not the investor-owned Hawaiian Electrical capabilities akin to a authorities company as a result of it provides electrical energy to the general public.


“It in reality might give us a extra direct path to legal responsibility and damages,” saidGraham LippSmith, a lawyer representing Maui hearth victims in one of many fits. “Hawaiian Electrical is a non-public utility however it will get to function as a quasi-governmental entity.”

Inverse Condemnation

Hawaiian Electrical had used each non-public and public land to arrange its energy traces — a few of which was destroyed by the fires. Even when the harm brought on by the utility’s gear was an accident, hearth victims have the constitutional proper to hunt compensation for it if they’ll present that Hawaiian Electrical was functioning like a authorities company.

The authorized argument, often called inverse condemnation, during which a property proprietor can sue the federal government for damages, is said to the constitutional means of eminent area – the ability of a authorities to take non-public property for public infrastructure initiatives, and in return compensate the proprietor for it.

Utilizing the authorized shortcut, Maui property homeowners could be entitled to recuperate their losses with out having to show that the utility acted recklessly. On this case, Hawaiian Electrical could be on the hook for broken property.

‘No Precedent’

Hawaiian Electrical stated in a regulatory submitting Friday that “there isn’t a precedent in Hawaii making use of inverse condemnation to a non-public get together like an investor-owned utility.” Hawaiian Electrical spokesman Darren Pai stated the corporate doesn’t touch upon pending litigation.

The blaze within the city of Lahaina broken or destroyed greater than 2,000 constructions and killed greater than 100 folks. Investigations into the reason for the wildfire are nonetheless ongoing and it’s not clear if the blame lies with Hawaiian Electrical.

Destroyed buildings following a wild hearth in Lahaina, on Aug. 17.

“We don’t essentially want to point out anybody did something improper, simply that they had been utilizing the property in a means that created a hazard, and that the property was broken from the use,” stated LippSmith, the victims’ lawyer.

Nonetheless, it is going to be a “stretch” to persuade a decide that the shortcut applies, stated David Callies, a land use knowledgeable and lately retired professor on the College of Hawaii Legislation College.

“The important thing to inverse condemnation is it’s acquired to be a authorities company that you just’re suing,” he stated. “As in PG&E, Hawaiian Electrical is a non-public company that occurs to be a public utility, which suggests its charges and another issues are regulated by authorities.”

Quite a few lawsuits have been filed alleging that the utility’s energy traces ignited the fires which destroyed a lot of Lahaina throughout an Aug. 8 storm. Essentially the most severe claims in these instances, together with a grievance filed by LippSmith’s agency, transcend property harm and blame Hawaiian Electrical for wrongful deaths.

The potential liabilities may attain virtually $4 billion if the utility is deemed negligent, based on funding analysis agency Capstone LLC. Hawaiian Electrical Industries owns Hawaii’s major utility — which gives energy to 95% of the state’s inhabitants and is regulated — and owns and operates the regional American Financial savings Financial institution FSB.

Learn Extra: Why Hawaii’s Energy Strains Are Suspect In Maui Hearth: QuickTake

Hawaii grew to become a US state in 1959, greater than 100 years after California. In consequence, the island state is commonly seen as a authorized clean canvas, with its courts drawing from different states the place authorized doctrines have had extra time to develop.

“Have they got inverse condemnation in Hawaii? Positive,” stated Paul Starita, one other lawyer whose agency is suing Hawaiian Electrical. “Has it been utilized in a wildfire context? No, not that we’re conscious of. And that’s why we haven’t pursued it.”

In recent times, California judges have grown extra receptive to inverse condemnation as state investigations have pointed to utilities’ gear and their lackluster administration of vegetation because the supply of probably the most harmful wildfires.

Learn Extra: Hawaiian Utility Sued by House owner Over Lahaina Hearth

Like different states, Hawaii has a provision in its structure which says “non-public property shall not be taken or broken for public use with out simply compensation.”

That language has been the muse for inverse condemnation for use in a wide range of disputes, stated Shelley Ross Saxer, a regulation professor at Pepperdine College, including that it is smart for attorneys to borrow from California’s expertise as a result of wildfire instances are new to Hawaii.

Saxer stated the devastating affect on Maui property homeowners boosts probabilities the idea will get a heat reception at Hawaii’s highest court docket.

“It’s a really sympathetic case on which to push this,” she stated.

Copyright 2023 Bloomberg.


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