Mauna Kea Beach Hotel Owners Sue Insurer for Earthquake Claim

January 3, 2008

The Mauna Kea Beach Hotel on the Big Island of Hawaii has sued one of its insurance carriers for denying a $20 million claim stemming from last year’s earthquakes.

The hotel has been closed for repairs and renovations since temblors of magnitudes 6.7 and 6.0 struck off the Big Island on Oct. 15, 2006.

Lawyers for the Mauna Kea estimate the cost of repairs and lost business to be in excess of $115 million.

The Mauna Kea has been closed since last December. It’s scheduled to reopen 12 months from now after repairs and extensive renovations.

Most of Mauna Kea’s 420 employees were laid off early this year.

Its sister hotel, the Hapuna Beach Prince Hotel, was able to reopen, and took in many of the Mauna Kea guests. Both hotels are owned by Prince Resorts Hawaii.

Lawyers for both hotels estimate the cost of repairs and lost business at more than $115 million.

In the lawsuit, the plaintiffs claimed that there were four different “tiers” of property insurance in force at the time of the earthquakes.

The companies providing the first three tiers of coverage have paid $30 million in claims — the full limits of their respective policies, they said.

But the fourth, Affiliated FM Insurance Co., based in Rhode Island, has denied coverage under its top-tier $20 million policy. It claims that the hotels suffered $14.49 million in damages and business losses — amounts covered by the other, lower-tier policies, according to the suit.

An Affiliated FM Insurance adjuster told the hotels in October 2007 that “the earthquake damage at the Mauna Kea could be repaired without closing the hotel,” the suit alleged.

But the insurer declined to assume liability for any “injury or death” that may have occurred if the hotel had remained open, the suit said.

The insurance company has denied the allegations in the lawsuit.

Lawyers for both sides in the dispute were unavailable for comment.

The renovation work at the Mauna Kea involves a comprehensive overhaul and redesign of the interior of the luxury facility.

Prince Resorts Hawaii President Donn Takahashi said this month that there will be fewer rooms at the Mauna Kea — 258 instead of 310. The main building will be reconfigured to include larger bedrooms and bathrooms, he said.

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