As lawsuits mount against the Champlain Towers South condominium association, the building’s and unit owners’ insurers will play key roles in footing the bill for any payouts arising from legal claims, according to local property insurance experts.
Since the deadliest building catastrophe in South Florida history last Thursday, three residents have filed lawsuits against the condo association for negligence and failing to keep the 136-unit condo building at 8777 Collins Avenue in a safe condition.
A grand jury will be empaneled to investigate the collapse, as the search for survivors and victims trapped in rubble of the partially collapsed 12-story tower continued on Wednesday. The death toll rose to 16 with 146 missing.
In response to the first lawsuit, James River Insurance Company, which provides the general liability insurance for Champlain Towers South, is signaling that it will pay out the entire amount of its policy to help satisfy any claims tied to the pending litigation and future lawsuits.
On Monday, James River attorney Sina Bahadoran wrote to Miami-Dade Circuit Court Judge Michael Hanzman, who is presiding over the case, about her client’s decision.
“We want to make it known that James River Insurance Company has made the decision to voluntarily tender its entire limit from the enclosed policy towards attempting to resolve all the claims in this matter,” Bahadoran wrote.
According to a copy of the condominium’s 2021 policy attached to the letter, the total amount James River can pay out is $5 million. Bahadoran and Brad Sohn, the lawyer representing Manuel Drezner, the resident who filed the first lawsuit, did not immediately respond to a request for comment.
Mike Gorham, executive vice president of insurance brokerage Brown & Brown South Florida, said by tendering the total dollar amount of the policy, James River avoided most legal fees and drawn-out court battles. The letter also shows that James River is not interested in a public battle over what’s covered when the loss of life and property is so great, Gorham added.
“While no one can put a value on a life and or a casualty event like this, $5 million is a substantial amount of money,” Gorham said. “That being said, there are [condominiums] that have $25 million-plus limits of insurance out there.”
However, settlements won’t come quickly. “It will take years and a lot of negotiations with survivors and family members [of the deceased],” Gorham added. “It will be similar to what occurred with the Florida International University bridge collapse.”
On March 15, 2018, a pedestrian bridge under construction over Tamiami Trail collapsed, crushing eight vehicles, injuring 10 people and resulting in six deaths. The bridge was aimed for Florida International University students to be able to safely cross the busy road.
Negotiations in bankruptcy court between 20 plaintiffs and most of the firms involved in the bridge’s construction led to a $103 million settlement two years ago. However, engineering firm Louis Berger Group, which was hired to double check plans for the bridge construction, has only settled three of six wrongful death lawsuits and the company’s attorneys are preparing for trial against 12 plaintiffs, according to media reports.
In addition to the condo association’s insurers, individual property insurers will also play a role in paying out claims. If unit owners had individual policies for the interior contents of a condo, including fixtures such as cabinets, then survivors and the estates of owners who perished in the collapse would likely receive the entire limit under those policies, Gorham added.
Stephen Marino, a partner with the law firm Ver Ploeg Marino that specializes in big property insurance claims, said the condo association is the first target of litigation, but that victims could also go after individual board members and any firms that did work for the association. Morabito Consultants, an engineering firm, produced the 2018 report on serious deficiencies at Champlain Towers South. Such firms’ insurers would have to provide payouts as well, Marino said.
Necessary repairs were expected to surpass $15 million.
“To the extent that there were board members who were supposed to take emergency actions and it wasn’t done would form the basis of a lawsuit [against them individually],” Marino said. “Hypothetically, if engineers found significant issues and then failed to say ‘You need to do this now,’ there could be claims against them.”
Jason Vanslette, a partner with the law firm Kelley Kronenberg who handles mortgage foreclosure litigation, said that lenders will also play a role in how individual property insurance funds are dispersed. “When it is a total loss, the lender will not endorse an insurance check unless the loan is fully paid off or work is done to bring the property back to its original condition,” he said.
Even when a condominium is decimated, the mortgage lien is still attached to the property, according to Vanslette.
“The individual property insurance is what secures the lender’s lien,” he said. “But the only payout to the lender would come from the homeowner’s insurance. Any other civil claims would not be something lenders can go after.”
Another problem that could arise is that the total loss payout from an individual policy may not be enough to cover any outstanding mortgage debt, Vanslette added. “But some lenders are empathetic,” he said. “And they will work with borrowers and call it a loss in an event like this.”
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