Condo Collapse: Everyone Will Point Fingers But Florida Laws Narrow Liability

Tom Hals | Insurance Journal

The collapse of a condominium tower near Miami will set off years of litigation as victims and their families look to find fault among the building’s management as well as engineers, architects and others, according to legal experts.

Disaster struck in Surfside, Florida, on June 24 as a major repair project was beginning, although the cause of one of the worst residential construction failures in the United States is likely to have many contributing factors stretching back years.

“Whether it be architects, engineers or contractors that had any involvement in this building, we’ll be looking at everybody to hold each party responsible for their negligence,” said Daniel Wagner, a real estate lawyer in south Florida, who declined to say if he was representing anyone involved in the collapse.

But it will be a process complicated by finger-pointing and a trend in recent years in Florida law that has made it increasingly difficult to hold parties accountable for construction defects, lawyers said.

Liability in complex disasters often gets parceled out among defendants, with a certain percentage being apportioned to each, legal experts said.

“It’s my professional opinion that everyone is going to blame everybody else,” Wagner said.

The death toll on Monday climbed to 28, and 117 were unaccounted for.

Less than 24 hours after the collapse, the first of at least three lawsuits was filed against Champlain Towers South Condominium Association Inc, run by a volunteer board comprised of owners, for failing to ensure the building’s safety.

Bob McKee, a lawyer who brought a case on behalf of Steven Rosenthal, a resident who survived the collapse, said until another cause can be identified, the presumption is failed maintenance was to blame.

The condo association president warned residents in an April letter that the situation had “gotten significantly worse” since “major structural damage” was identified in a 2018 inspection. The president urged them to support a $15 million assessment for repairs while acknowledging the work “could have been done or planned for in years gone by.”

McKee said plaintiffs will identify other potentially liable parties through the discovery process.

One lawsuit by the family of missing resident Harold Rosenberg also named as defendants Morabito Consultants and SD Architects for failing to warn residents of the danger of collapse.

The lawsuit blamed the Morabito engineering firm, which conducted the 2018 inspection, for allegedly failing to warn the condo association of the need to evacuate the building. The firm was retained again in 2020 and did not warn residents the damage it uncovered two years earlier had not been repaired, the lawsuit said.

Morabito said in a statement that it provided its 2018 report and recommendations to the condo association.

Rene Rocha, a Morgan & Morgan attorney working on the Rosenberg case, said informing the board may not have been enough.

“They could have walked away from the job if they told the board it would be unsafe to proceed this way,” said Rocha. “Obviously, it didn’t happen that way.”

The Rosenberg lawsuit also said it planned to sue Surfside for allegedly failed to hire an independent expert to inspect the building after receiving the 2018 Morabito report.

The condo association declined to comment on the lawsuit, SD Architects could not be reached, and the town did not respond.

Legal experts said the defendants will likely argue there was no evidence that the building was not an immediate risk of collapse.

A Florida judge appointed attorney Michael Goldberg of the Akerman law firm on Friday as a receiver for the condo association, which disclosed on Thursday it had $30 million in property insurance and $18 million for liability. Miami-Dade Circuit Judge Michael Hanzman said the insurance “will obviously be inadequate to compensate everyone fully.”

Accountability Difficulty

Residents and their families may have to contend with Florida laws and court rulings that have made it more difficult to hold parties accountable for defects in professional design, construction or code compliance, according to Barry Ansbacher, a Florida attorney who specializes in condo and construction law.

For example, a 2006 law shortened to 10 years from 15 years the window for plaintiffs to sue for certain defects in design and construction and the potential personal liability for architects and engineers has also been narrowed, Ansbacher said.

Court rulings have also limited liability, including a 1985 decision that sovereign immunity protects local government building inspectors.

“Often, by the time something is discovered that was not done properly, the clock has run out and there is no liability,” Ansbacher said.

There is also the possibility of criminal charges.

Miami-Dade State Attorney Katherine Fernandez Rundle said she would have a grand jury examine the collapse, although she did not say whether she would consider charges. Florida grand juries can also make recommendations on matters of public policy.

One Florida prosecutor said the most likely charge if someone’s actions led to the collapse would be the crime of manslaughter by culpable negligence.

“To have a crime here you need more than what is presently being reported,” said Dave Aronberg, the state attorney for Palm Beach County. “You have to have someone who knew that destruction was imminent and did nothing about it.”

Judge Says $48M in Coverage for Collapsed Condo Tower Won’t Be Enough

Jim Sams | Claims Journal

Five lawsuits have been filed against the Champlain Towers South Condominium Association in Surfside, Florida as of Thursday afternoon as plaintiffs move to preserve evidence at the site of the partially collapsed high-rise to stake a claim to a share of the reported $48 million in insurance coverage available.

Miami-Dade Circuit Judge Michael Hanzman held an online emergency meeting Thursday morning. Attorneys for the condo association told him that they are aware of a $30 million property insurance policy from Great American and $18 million in liability insurance, according to a webcast of a segment of the hearing posted by the Miami Herald.

“It looks like for the property damage claims and for the injury and death claims there’s going to be a total of $48 million, which will obviously be inadequate to compensate everyone fully for the extent of their losses,” Hanzman said. “I don’t know whether there are any third-party claims. Maybe there are, maybe there aren’t. But we are dealing certainly with a limited pot as far as insurers go.”

As of Thursday, rescuers had found the remains of 18 people who had perished in the collapse of the condo tower and 145 residents were missing. The search and rescue effort was suspended on Thursday after movement in the debris pile raised concerns that the still-standing portion of the condo tower may fall as well.

A public relations firm hired by the condominium association board issued a statement on Friday saying that an independent receiver should be appointed to oversee the legal and claims process. Hanzman said during Thursday’s hearing that he was considering such an appointment.

“The collapse of Champlain Towers South is an unspeakable tragedy that has devastated our community, our neighbors, and our friends,” the association said. “We are grieving and our hearts ache for those who have been lost and for their families. They have our deepest condolences.”

Miami-Dade court records show that plaintiffs are suing the association and also a structural engineering firm and an architectural firm that participated in the 40-year recertification of the building. Morabito Consultants inspected the building in 2018 and reported that the pool deck was improperly constructed, causing water damage to the concrete below. SD Architects also participated in the recertification process.

The suits filed so far:

  • A construction defects lawsuit by plaintiffs Steven, Mark, Shoshana and the estate of Harold Rosenberg against the association; Morabito Consultants and SD Architects.
  • A premises liability lawsuit filed against the association by Alex J. Anton and the estate of Beatrice Guerra Rodriguez.
  • A contract and indebtedness lawsuit filed against the association by Raysa Rodriguez.
  • A construction defect lawsuit filed against the association by Manuel Drezner
  • A construction defect lawsuit filed by Steve Rosenthal.

“There will be many people to blame for the tragic collapse of the Champlain Towers South Condominium. Therefore, it is crucial now to locate and preserve all of the relevant discovery and materials,” states the lawsuit filed by Rodriguez, who owns Unit 907 of the destroyed condo building.

At least one insurers has already agreed to pay up. The Miami Herald reported that an attorney for James River Insurance pledged during the hearing to tender the full $2 million limit on a liability insurance policy issued to the condominium association.

Donna Berger, an attorney who represents the condominium association, told USA Today that it was “despicable” that a lawsuit had been filed assigning blame while emergency crews were still searching for survivors.

But Chip Merlin, a Tampa attorney whose law firm represents Rodriguez, said a two-year claim filing deadline imposed by Senate Bill 76, signed into law by Gov. Ron DeSantis on June 11, forces attorneys to assert their clients rights early on. Merlin railed against the bill during his regular Tuesday webcast, saying it will harm people with complicated claims, such as his Champlain Towers South clients.

“How can you make a claim for law and ordinance in two years when the claim for it will not ripen for three years because it takes that long to do major work?” he said in an email in response to a question by the Claims Journal.

Attorneys for the Rosenberg family asked the court for permission to fly a drone over the rubble pile, according to media reports.

The Morgan & Morgan and Saltz Mongeluzzi & Bendesky law firms stressed the importance of early intervention to preserve evidence in the complaint they filed in Miami-Dade Circuit Court. The two firms said they have experience in litigation related to previous structural collapses in Philadelphia, Atlantic City and New Orleans.

“On the basis of this extensive experience in building collapse litigation, plaintiffs’ counsel has seen first-hand that the evidence immediately observed and documented at a collapse site is often the most critical evidence in the case and can lead to figuring out how the collapse happened,” the suit says.

Stephen Marino, an attorney with Ver Ploeg & Marino in Miami, said most of the recovery to homeowners for property damage to the Champlain Towers building would likely come from the association’s property insurance policy. He said condo owners often buy additional coverage to insure their personal property, but that would not go toward reconstruction of the building.

He said judging by press reports, lengthy litigation seems inevitable. The Miami Herald reported the condominium association directors resigned their positions in 2019 because of constant squabbling over a potential $15 million special assessment to make repairs. A former city official reportedly told residents that the building was in good condition.

A negligence lawsuit would require the plaintiff to show that a responsible party knew or reasonably should have known of a defect, but failed to correct it, Marino said. More must be known about what caused the collapse before assigning blame.

“There seems to be a several-year history of awareness of a significant structural issues and a seeming, if not failure, at least a seeming slow approach to repairing those issues,” he said.

The “Fortuity” and “Known Loss Doctrines” of Insurance Coverage – Are You Covered?

Meredith Storm | Pessin Katz Law

The concept of risk is central to insurance. Insurance coverage is premised on the exchange of risk and the possibility that an unintended or unexpected event will occur. Accordingly, it seems only logical that insurance carriers are not keen on providing coverage for a loss that is very likely to occur or has already occurred when an insured purchases a liability policy. To that end, courts have developed two common law defenses, often used interchangeably, known as the “fortuity” and “known loss” doctrines. Under the former, insurance is not available for losses the policyholder “knows of, planned, intended, or is aware are substantially certain to occur,” and under the latter, an insured “may not obtain insurance to cover a loss that is known before the policy takes effect.” Mayor and City Council of Baltimore v. Utica Mutual Ins. Co., 145 Md. App. 256, 306 n.49 (2002).

In addition to the recognition that insurance covers risks as opposed to certainties, the principle underlying the known loss doctrine is that insureds should not be permitted to benefit from wrongfully withholding material information from insurers in order to obtain insurance for a loss. Most courts hold that for an insurance company to use the known loss defense, the insured must have actual knowledge of the loss. General Housewares Corp. v. National Sur. Corp., 741 N.E.2d 408, 413 (Ind. Ct. App. 2000). Some courts require a “reason to know,” “evidence of probable loss,” or whether a “reasonably prudent” insured would know that the loss is highly likely to occur. Id. Maryland, however, does not appear to be such a jurisdiction.

Moral of the story? Don’t risk waiting until your basement is a swimming pool to call your insurance agent to obtain flood insurance or your laptop is stolen out of your car to get homeowners or renters insurance!

Insurer Prevails in First Substantive Appellate Ruling in COVID-19-Related Insurance Coverage Litigation

Andrew Daechsel | PropertyCasualtyFocus

In what appears to be the first substantive appellate ruling in COVID-19-related insurance coverage litigation, the Eighth Circuit Court of Appeals in Oral Surgeons, P.C. v. Cincinnati Insurance Co. ruled in favor of the insurer and affirmed the trial court’s order of dismissal under Iowa law.

The plaintiff in Oral Surgeons, a dental practice, allegedly sustained financial losses due to the COVID-19 pandemic and related government orders that temporarily restricted the plaintiff from providing non-emergency dental procedures. The plaintiff sought coverage for its alleged losses under a policy that provided coverage for lost business income and certain extra expense sustained due to the suspension of operations “caused by direct ‘loss’ to property.” The policy defined “loss” as “accidental physical loss or accidental physical damage.”

The Eighth Circuit held that the policy did not provide coverage because there had been no direct physical loss or damage to property. The Eighth Circuit explained: “The policy here clearly requires direct ‘physical loss’ or ‘physical damage’ to trigger business interruption and extra expense coverage. Accordingly, there must be some physicality to the loss or damage of property — e.g., a physical alteration, physical contamination, or physical destruction. The policy cannot reasonably be interpreted to cover mere loss of use when the insured’s property has suffered no physical loss or damage.”

The court further noted that “[t]he unambiguous requirement that the loss or damage be physical in nature accords with the policy’s coverage of lost business income and incurred extra expense during the ‘period of restoration.’” The policy defined the “period of restoration” as beginning at the time of “loss” and ending on the earlier of: “(1) the date when the property at the ‘premises’ should be repaired, rebuilt or replaced with reasonable speed and similar quality; or (2) the date when business is resumed at a new permanent location.” The Eighth Circuit explained: “That the policy provides coverage until property ‘should be repaired, rebuilt or replaced’ or until business resumes elsewhere assumes physical alteration of the property, not mere loss of use.”

In ruling in favor of the insurer, the Eighth Circuit rejected the plaintiff’s argument that “the policy’s disjunctive definition of ‘loss’ as ‘physical loss’ or ‘physical damage’ creates an ambiguity that must be construed against [the insurer].”

The court concluded by pronouncing: “The policy clearly does not provide coverage for [the plaintiff’s] partial loss of use of its offices, absent a showing of direct physical loss or physical damage. ‘[W]here no ambiguity exists, we will not write a new policy to impose liability on the insurer.’”

This, That, and the Other: Different Insurance Policies Can Cover the Same Loss

Kenneth Gorenberg | Barnes & Thornburg

As policyholder counsel, we’re frequently asked which insurance policy may cover a particular claim. Sometimes, the answer is not just one but more than one.

How a Claim Can Be Covered By More Than One Policy

There are several circumstances in which more than one policy may respond to a given claim.

For example, in compliance with a contract between Companies A and B, Company A may have made Company B an “additional insured” on a policy carried by Company A. A claim against Company B may thereby be covered by both B’s own policy and the one purchased by A. The same contract may require A to provide a certificate of insurance to B, identifying A’s policy. That may allow B to provide notice directly to A’s insurance company as well as B’s. Depending on the requirements of the contract between A and B, as well as the policy language and the law in some jurisdictions, B may even be allowed to target its tender to A’s insurer as the only one to cover the claim, leaving B’s own policy essentially untouched.

Another possibility is that Company X may have purchased more than one policy for itself that potentially covers the same loss. For example, an architectural or engineering firm typically carries both commercial general liability (CGL) and professional liability (PL) (also known as errors and omissions (E&O)) insurance. Depending on the allegations and any facts that may be proven about something that goes wrong on a job, both policies may cover the claim. That’s particularly likely if a lawsuit alleges only general negligence rather than professional negligence, even though much of Company X’s work may be considered professional in nature. Company X should consider notifying both its CGL and PL insurers.

How Multiple Insurance Policies May Interact In Covering a Claim

When more than one policy can cover a given loss, another issue is how the policies interact to determine which insurance company pays what portion or in what order. Many policies actually anticipate this situation.

In our earlier example regarding Companies A and B, their contract may require that A’s policy will be “primary and non-contributory.” A’s policy, if it complies with that requirement, probably will have an endorsement that says, in effect, it will cover B up to the dollar limit of A’s policy, and B’s policy does not have to contribute unless A’s insurer paid its entire limit.

An insurance policy may also contemplate the existence of another policy by including an “other insurance” provision. This clause comes in one of basically three varieties.

  • A so-called “pro rata” clause states that multiple insurance policies will contribute simultaneously, perhaps in equal amounts or prorated according the dollar limits of liability in the respective policies
  • An “excess” provision states that the policy becomes excess, paying only after the other policy has been fully paid and only to the extent the loss exceeds the limit of the other policy
  • An “escape” clause says that policy will not provide coverage, allowing that insurer to escape liability entirely if there is another policy that covers the same loss

Importantly, the “other insurance” provisions of all triggered policies must be considered. One can imagine that they might conflict. For example, if two policies have “excess” clauses, it’s obviously impossible for each policy to operate in excess of the other. In that situation, applicable state law generally provides a default rule for the two policies to share the loss, with neither being excess of the other.

Takeaways

When thinking about which policy may cover a claim, consider the possibility that multiple policies may apply. It’s at least worth looking at more than one policy, including various types, seemingly different policy periods, or even those purchased by other companies. While it may seem daunting to analyze or strategize about the availability of coverage under more than one policy, that’s usually a good problem to have.