The luxury Mauna Kea Beach Hotel on the Big Island, closed for repairs and renovations since the devastating earthquakes of October 2006, has sued one of its insurance carriers for denying a $20 million claim for quake-related repairs and business losses.

In the suit, filed in state court last month and moved to federal court this week, lawyers for the Mauna Kea and the Hapuna Beach Prince Hotel estimated the cost of repairs and lost business to be in excess of $115 million.

The Mauna Kea has been closed since December 2006 and is scheduled to reopen in December 2008 after completion of repairs and extensive renovations. The Hapuna Beach remained open after the earthquakes. Both hotels are owned by Prince Resorts Hawaii.

In the lawsuit, the plaintiffs claimed that there were four different "tiers" of property insurance in force at the time of the earthquakes and that the companies providing the first three tiers of coverage have paid $30 million in claims — the full limits of their respective policies.

But the fourth, Affiliated FM Insurance Co., based in Rhode Island, has denied coverage under its top-tier $20 million policy, claiming 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 Oct. 15, 2006, earthquakes measured 6.7 and 6.0 in magnitude. The Mauna Kea transferred many of its guest to the Hapuna Beach hotel after the quake and then closed its doors indefinitely in December 2006.

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

In addition to structural repairs, the renovation work 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. Rooms in the main building will be reconfigured to include larger bedrooms and bathrooms, he said.

Reach Jim Dooley at jdooley@honoluluadvertiser.com.

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