On Tuesday, Hawaii lawmakers voted to advance SB 1166, a bill that would allow property insurers to file lawsuits in an attempt to recover costs from energy companies after natural disasters—despite opposition from the insurance industry itself.

There is now mounting opposition from the insurance industry after E&E News reported last week that

“efforts to make the fossil fuel industry pay for rate increases won’t work — either in court or to fix the national insurance crisis.”

Insurers Identify Issues

In written testimony submitted ahead of Tuesday’s hearing, the National Association of Mutual Insurance Companies wrote:

“SB 1166, HD 2 would establish a concerning legal and public policy precedent of directly connecting an insurers’ or the associations’ legal subrogation decision to a politically charged issue (climate change liability) and the insurers’ or associations filed insurance rates, which are currently reviewed by the state insurance regulator to make sure that the rates are actuarially sound and not excessive, inadequate or unfairly discriminatory. Insurance rate making needs to be strictly connected to analysis of risk of loss exposure associated with standard rating variables that are evaluated by considering claims loss histories and predictive risk models”

“…NAMIC is concerned about the proposed legislation and respectfully requests your NO VOTE on SB 1166, HD2”

Similarly, the American Property Casualty Insurance Association wrote:

“The American Property Casualty Insurance Association (APCIA) has concerns regarding SB 1166 SD2 HD2 and its potential impacts on Hawaii’s already constrained property insurance market. While the challenges the bill seeks to address—rising premiums, higher costs of coverage, insurer withdrawal, reduced coverage options, and the cessation of new business writings—are real and significant, SB 1161 SD2 HD2 is unlikely to resolve these issues and may, in some respects, exacerbate them”

“The insurance market challenges facing Hawaii are the result of numerous factors, including increased catastrophic risk, reinsurance costs, inflation in construction and repair, and global capital market conditions. These systemic issues are unlikely to be meaningfully improved through litigation-driven approaches alone”

A Risky Route

The stakes of enacting SB 1166 are high, as Hawaii already has some of the highest prices in the country on everything from energy to everyday goods.

The American Petroleum Institute warned against passing the bill, particularly while the state and local governments are already tied up in litigation against the energy industry:

“This bill would impose liability on companies that have operated for decades under federal and state permits, tax structures, and regulatory approvals that have enabled Hawaii’s fossil fuel-based energy system. Fuel remains a legal, essential product that we depend upon every day. Adding new liability exposure and litigation would discourage the continued investment and long term planning needed to maintain reliable supplies of transportation fuels, marine fuels, and that generation that households and businesses rely on.”

“In fact, the state, City and County of Honolulu and Maui County are currently litigating climate related claims against major energy companies in Hawaii State courts. So given the pending litigation on this issue, which is rife with uncertainty and legal questions, we ask that the committee not commit resources into a bill that’s effectively already being litigated.”

Hawaii Deputy Attorney General Christopher Han previously stated this same problem:

“I’m not sure if that would be appropriate, given that the AG already filed a lawsuit last year against fossil fuel companies for climate change, on behalf of the state. So, a state agency trying to file a separate lawsuit now, could be seen as an attempt at an unlawful double recovery.”

Separately, Democratic Representative Matthias Kusch expressed concern about the bill’s long-term effects:

“Because I’m very concerned that we create a downstream effect that makes insurers pull out. I’m guy who has had multiple policies pulled already because the market is not sweet enough for terms.

Bottom Line

The insurance and energy industries have made it clear: SB 1166 would establish concerning legal and public policy precedents and may exacerbate the very issues it attempts to resolve.