HB 1638: Covered Catastrophic Wildfires; Actual Damages; Aggregate Liability Limit; Electric Utilities; Economic Damages; Statute of Limitation; Right to Subrogation

HOUSE OF REPRESENTATIVES	H.B. NO.	1638
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII

A BILL FOR AN ACT

 

 

relating to property damages.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  Section 663-8.8, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§663-8.8[]  Limitation on aggregate liability;] Covered catastrophic wildfires; limitations on claims of damage to property; electric utilities.  (a)  For claims alleging the loss of or damage to real or personal property from a covered catastrophic wildfire, damages shall be limited to the actual damages suffered by the claimant.  Punitive damages shall be prohibited.

     [(a)] (b)  The aggregate liability of an electric utility, including its affiliates, collectively, for qualifying damages arising from a covered catastrophic wildfire shall not exceed [the least of the maximum payable amount authorized by the rules, adopted pursuant to section 269-27.9, for either the set period of time in which the covered catastrophic wildfire began or per event, as determined by the commission, or for the remainder of the maximum payable amount to the extent that the electric utility has already paid qualifying damages for the same time period or event.] $1,000,000,000 per occurrence.  Claims for damages to insured property in excess of the coverage limit shall not be subject to the limitation under this subsection.

     [(b)] (c)  An electric utility that seeks to assert the limitation on aggregate liability set forth in subsection [(a)] (b) shall:

     (1)  Have a wildfire mitigation plan[, as defined in section 269-27.9,] that is approved by the public utilities commission and shall have sought and received a determination from the public utilities commission that the wildfire mitigation plan is being implemented on the timeline approved by the public utilities commission; and

     (2)  Be in full compliance with any conditions and reporting requirements established by the public utilities commission by rule [pursuant to subsection 269-27.9(c).] to ensure compliance with the wildfire mitigation plan.

     [(c)] (d)  All civil actions arising out of a catastrophic wildfire shall be brought in the circuit in which the catastrophic wildfire occurred.  The court shall adopt procedures to equitably apply the limit set forth in subsection [(a)] (b) to all applicable filed civil claims, and notwithstanding any law to the contrary, joint and several liability shall not apply to qualifying damages, even as to any amount of qualifying damages in excess of the aggregate liability of an electric utility; provided that [in]:

     (1)  Notwithstanding anything in section 663-10 or any other applicable statute, actions for claims for qualifying damages shall be filed by the insurer as a subrogation claim, unless the insurer expressly waives its authority to file the claim or the contract with the policyholder does not authorize the insurer to file such claims.  If an insurer files a claim under this paragraph, the policyholder shall file all claims with respect to the insured property with the insurer and shall be barred from filing a separate claim against the electric utility, except a plaintiff may file a claim against the electric utility for damages to the insured property in excess of the coverage limit in the policy.  Nothing in this paragraph shall prohibit a person from filing an action for claims for actual damages under subsection (a) not covered by an insurance policy, which shall not be subject to the limitation under subsection (b);

     (2)  In any action to recover from a person or an entity in connection with a covered catastrophic wildfire, the person or entity may claim, in defense, apportionment of fault to any other person, entity, electric utility, or electric cooperative, even as to those who are not a party to the action[.]; and

     (3)  Notwithstanding section 657-7, all actions for claims for qualifying damages shall be filed within one year after the covered catastrophic wildfire and not after.

The exceptions to the abolition of joint and several liability set forth in section 663-10.9 shall not apply to any suit, claim, arbitration, or other civil action arising out of a covered catastrophic wildfire.  All settlements or judgments for claims for qualifying damages shall be subject to approval by the court.  The court shall not approve any settlement or judgment that would cause the aggregate liability of an electric [utilities] utility to exceed the aggregate liability limit [prescribed by the commission if the utility is entitled to invoke the limitation] under subsection [(a).] (b).  No liability allocable to the electric utility that is not payable because of the aggregate liability limit shall be shifted, in any manner, to any other alleged tortfeasor or obligor.

     [(d)] (e)  A court may consolidate cases arising from a covered catastrophic wildfire.  Any circuit court that is not the consolidating court shall transfer any civil case to facilitate the consolidation.

     [(e)  No later than twenty days prior to the convening of each regular session, the commission shall study and submit a report to the legislature that includes:

     (1)  An assessment of whether the factors considered pursuant to section 269-27.9(b) adequately balance the solvency interests of electric utilities with the compensation owed in the previous year to catastrophic wildfire victims, or whether additional factors should be considered; and

     (2)  Any other findings and recommendations, including any necessary proposed legislation.]

     (f)  The director of Hawaii emergency management shall determine whether a wildfire is a covered catastrophic wildfire and shall certify that a wildfire is a covered catastrophic wildfire no later than      days after extinguishment of the wildfire.  The director's determination shall be final and not subject to appeal.

     [(f)] (g)  For the purposes of this section:

     "Catastrophic wildfire" means a wildfire occurring in the State on or after the effective date of this Act that substantially damages or destroys more than [five]:

     (1)  Five hundred commercial structures or residential structures [designed for habitation]; or[, for]

     (2)  For an electric cooperative, [a wildfire that substantially damages or destroys more than] fifty commercial structures or residential structures [designed for habitation].

     "Covered catastrophic wildfire" means a catastrophic wildfire that may have been caused, or whose severity may have been increased, by an electric utility's facilities or actions.

     ["Electric utility" means a public utility that exists for the furnishing of electrical power, including an electric cooperative.]

     "Electric cooperative" [is] means an electric utility that [has the same meaning as in] meets the definition of electric cooperative under section 269-31(c).

     "Electric utility" means a public utility that exists for the furnishing of electrical power, including an electric cooperative.

     "Public utility" has the same meaning as in section 269‑1.

     "Qualifying damages" means economic damages arising out of the loss of or damage to real or personal property, covered by a property insurance policy, from a covered catastrophic wildfire[.], but does not exceed the coverage limit established within the property insurance policy for that real or personal property.  "Qualifying damages" does not include claims for physical bodily harm or emotional harm.

     "Wildfire mitigation plan" means the plan that each electric utility shall file with the public utilities commission, that shall be periodically updated at a frequency determined by the public utilities commission, and that sets forth the electric utility's practices to protect public safety and reduce risk to customers from wildfires and to promote the resilience of the electric system to wildfire damage, pursuant to requirements established by the public utilities commission."

     SECTION 2.  Section 663-10, Hawaii Revised Statutes, is amended to read as follows:

     "§663-10  Collateral sources; protection for liens and rights of subrogation.  (a)  In any civil action in tort, the court, before any judgment or stipulation to dismiss the action is approved, shall determine the validity of any claim of a lien against the amount of the judgment or settlement by any person who files timely notice of the claim to the court or to the parties in the action.  The judgment entered, or the order subsequent to settlement, shall include a statement of the amounts, if any, due and owing to any person determined by the court to be a holder of a valid lien and to be paid to the lienholder out of the amount of the corresponding special damages recovered by the judgment or settlement.  In determining the payment due the lienholder, the court shall deduct from the payment a reasonable sum for the costs and fees incurred by the party who brought the civil action in tort.  As used in this section, lien means a lien arising out of a claim for payments made or indemnified from collateral sources, including health insurance or benefits, for costs and expenses arising out of the injury which is the subject of the civil action in tort.  If there is a settlement before suit is filed or there is no civil action pending, then any party may petition a court of competent jurisdiction for a determination of the validity and amount of any claim of a lien.

     (b)  Where an entity licensed under chapter 432 or 432D possesses a lien or potential lien under this section:

     (1)  The person whose settlement or judgment is subject to the lien or potential lien shall submit timely notice of a third-party claim, third-party recovery of damages, and related information to allow the lienholder or potential lienholder to determine the extent of reimbursement required.  A refusal to submit timely notice shall constitute a waiver by that person of section 431:13-103(a)(10).  An entity shall be entitled to reimbursement of any benefits erroneously paid due to untimely notice of a third-party claim;

     (2)  A reimbursement dispute shall be subject to binding arbitration in lieu of court proceedings if the party receiving recovery and the lienholder agree to submit the dispute to binding arbitration, and the process used shall be as agreed to by the parties in their binding arbitration agreement; and

     (3)  In any proceeding under this section to determine the validity and amount of reimbursement, the court or arbitrator shall allow a lienholder or person claiming a lien sufficient time and opportunity for discovery and investigation.

     For purposes of this subsection:

     "Third-party claim" means any tort claim for monetary recovery or damages that the individual has against any person, entity, or insurer, other than the entity licensed under chapter 432 or 432D.

     "Timely notice of a third-party claim" means a reasonable time after any written claim or demand for damages, settlement recovery, or insurance proceeds is made by or on behalf of the person.

     (c)  Nothing in this section shall limit the right of a lienholder that is a property and casualty insurer to pursue a separate subrogation claim against an alleged tortfeasor, including an electric utility in the case of a catastrophic wildfire under section 663-8.8."

     SECTION 3.  Section 269-27.9, Hawaii Revised Statutes, is repealed.

     ["[§269-27.9]  Determination of limitation on liability.  (a)  The commission shall initiate a proceeding for the adoption of rules pursuant to chapter 91 to establish the maximum amount each electric utility may pay to resolve claims arising from any covered catastrophic wildfires, as defined in section 663-   , for set periods of time established by rules in accordance with this section.  The commission shall have sole discretion to establish the maximum payable amounts and applicable periods of time.  The rules adopted by the commission under this section shall have the force and effect of law.

     (b)  The commission shall adopt rules as soon as is practicable.  The rules shall authorize the maximum payable amount each electric utility may pay to resolve qualifying damages arising from any covered catastrophic wildfires, as those terms are defined in section 663-   , that occur within a set period of time, or per event, as determined by the commission, without harming ratepayers or materially impacting each electric utility's ability to provide adequate and safe service consistent with the public interest.  In adopting rules to establish the maximum payable amount, the commission shall consider, at a minimum:

     (1)  Whether the maximum payable amount shall be delineated by the qualifying damages arising from covered catastrophic wildfires that occur:

          (A)  Within a set period of time that is determined by the commission; or

          (B)  Per event;

     (2)  Different approaches to establishing the maximum payable amount, such as a flat dollar limit for the set period of time, or per event; one based upon a percentage of the electric utility's market capitalization or rate base; or hybrid approaches, including examining frameworks adopted or considered in other wildfire-prone states and their effectiveness;

     (3)  Impacts on the electric utility's credit ratings, borrowing costs, and customer's electricity rates, and how the establishment of the maximum payable amount will help to achieve intended outcomes of improving the utility's credit rating and lowering costs passed on to customers;

     (4)  Impacts of the maximum payable amount upon the insurance market in the State;

     (5)  Impacts of the maximum payable amount on the indemnity, contribution, and subrogation rights of any person or entity;

     (6)  Impacts on the liability exposure of other hypothetical future co-defendants with respect to claims arising from a catastrophic wildfire;

     (7)  Impacts on potential future plaintiffs who could be negatively impacted by the establishment of the maximum payable amount;

     (8)  The affordability of electric utility service and the potential impacts on customer's electricity rates by the establishment of the maximum payable amount;

     (9)  Requirements to maintain or improve the quality of service to the electric utility's customers;

    (10)  Requirements to improve the management of the electric utility doing business in the State;

    (11)  Requirements to meet state policy goals for clean energy and climate;

    (12)  Requirements to implement wildfire mitigation plans and improve safety;

    (13)  Requirements to improve interconnection costs and timeliness; and

    (14)  The restriction or reduction of compensation packages and bonuses to officers and employees of the electric utility.

     (c)  The rules adopted pursuant to this section shall also include:

     (1)  Conditions to ensure that the establishment of the maximum payable amount is consistent with the public interest;

     (2)  Annual reporting requirements for compliance with any conditions established; and

     (3)  Procedures for corrective actions if the electric utility is not in compliance.

Rules required to be adopted under this section shall be adopted in a single rulemaking proceeding.  Upon request by the commission, the electric utility or any state or county agency shall provide any information that is relevant to the rulemaking proceedings under this section.

     (d)  Notwithstanding any other law to the contrary, the rules adopted under this section shall be presented to, and subject to the approval of, the governor.  If the governor approves the rules, the governor shall sign the rules, and the rules shall be adopted as provided in section 91-3.  If the governor does not approve the rules, the governor may return the rules to the commission with the governor's reasons for disapproval.  The governor shall have twenty-one days to consider the rules after the rules are presented to the governor, and if the rules are neither signed nor returned by the governor within that time, the rules shall be adopted as if the governor had signed them.

     If the rules are returned to the commission, the commission may start anew the rule-making process set forth in subsection (b).

     (e)  On or before the last day of the preceding set period of time established by the commission with respect to each electric utility, the commission shall adopt rules pursuant to subsection (b) and (c) for the next subsequent proposed period of time.

     (f)  Notwithstanding any other law to the contrary, the supreme court shall have original jurisdiction over any petition to obtain a judicial determination as to the validity of the rules adopted under this section.  The petition shall be filed with the clerk of the supreme court within thirty days of the filing of the rules with the lieutenant governor pursuant to section 91-4(b).  After an action is filed pursuant to this paragraph, the supreme court shall give priority to the action over all other civil or administrative appeals or matters and shall render a final judgment and opinion as expeditiously as possible.  No action challenging the validity of the rules may be brought except as provided in this subsection.

     In all collateral proceedings, including any civil action to recover damages for a covered catastrophic wildfire, the maximum payable amounts established by the rules shall be conclusive and not subject to judicial review.  Nothing in this section or rules adopted under this section shall be construed to create any property interest or entitlement of any kind in the electric utility, and no claim by any party, whether sounding in law or equity, or under article I, section 20, of the Hawaii State Constitution, may be brought against the commission, its commissioners, officials, and employees, or the State relating to rulemaking under this section.

     (g)  For purposes of this section:

     "Electric utility" includes an electric cooperative, as defined in section 269‑27.8(b).

     "Wildfire mitigation plan" means the plan that each electric utility shall file with the commission, and which shall be periodically updated at a frequency determined by the commission, that sets forth the utility's practices to protect public safety and reduce risk to customers from wildfires and to promote the resilience of the electric system to wildfire damage, pursuant to requirements established by the commission."]

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect upon its approval.

 

INTRODUCED BY:	_____________________________

 

 

Report Title:

Covered Catastrophic Wildfires; Actual Damages; Aggregate Liability Limit; Electric Utilities; Economic Damages; Statute of Limitation; Right to Subrogation

 

Description:

Limits claims alleging property damage from covered catastrophic wildfires to actual damages.  Amends the aggregate liability limit for qualifying damages from covered catastrophic wildfires to be $1,000,000,000, rather than administratively established by the Public Utilities Commission, and makes the limit applicable only to property covered by a property insurance policy up to the coverage limit.  Requires the Director of Emergency Management to determine whether a wildfire is a covered catastrophic wildfire.  Specifies that claims subject to the limit must be filed within one year of the covered catastrophic wildfire.  Clarifies that a property and casualty insurer's rights to subrogation are not limited in the context of an insured's recovery by judgment or settlement of a third-party tort claim.

 

 

 

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