The Hawaii Supreme Court on Wednesday agreed to answer key questions that will determine the fate of a proposed, $4 billion settlement of hundreds of lawsuits related to 2023’s Maui wildfires.

The state of Hawaii, Maui County, Hawaiian Electric Co., Hawaiian Telcom, Kamehameha Schools and other defendants have agreed to pay $4.04 billion to settle the claims of hundreds of individual fire victims.

But whether that deal can go forward depends on whether insurers, which are not parties to the settlement, can continue to pursue their own lawsuits against several of the defendants, including HECO and Kamehameha Schools. 

Now the state’s highest court has agreed to decide the issue by answering several key legal questions posed by Maui Circuit Court Judge Peter Cahill.

“I think the Supreme Court recognizes the importance of the issue for the people of Maui and the state of Hawaii and its core institutions,” said Jesse Creed, a liaison counsel for thousands of fire victims who have filed suits. “If the Supreme Court didn’t accept the questions, the settlement would fail.”

Adam Romney, a lead counsel for the insurance industry, said the Supreme Court’s response came as no surprise. Among other signs that the court would take up the matter was that Supreme Court Justice Vlad Devens had recused himself from the case for undisclosed reasons.

“You don’t recuse yourself from a case the court’s not going to take,” Romney said.

Which side will win is less clear.

The insurers have paid out more than $2.3 billion in claims to fire victims and expect to pay out about $1 billion more. Instead of participating in the settlement, more than 140 of the insurers have continued to pursue claims in Honolulu state to recoup those losses. The overarching question the Supreme Court will decide is whether those claims – routinely filed by insurers in such instances and known as subrogation claims – will be allowed to go forward.

The subrogation suits pose a problem for defendants because, even if the defendants were to settle suits filed by fire victims, the defendants still would face billions of dollars in potential claims from the insurers. Accordingly, for practical purposes the settlement won’t become final as long as the subrogation lawsuits loom. 

Cahill took a step to shut down the subrogation suits in August by ruling that the insurers were barred from continuing with independent subrogation lawsuits. But later that month, facing criticism from insurers insisting they have the right to pursue subrogation, Cahill asked the Hawaii Supreme Court to weigh in.

The Supreme Court has laid out a timetable that could allow it to resolve the issues within 90 days. The victims, various defendants and insurers have 40 days to file opening briefs with the court. After the last opening brief is filed, each party has 40 days to file a single reply brief.