On June 24, Champlain Towers South, a 12-story condominium in Florida, collapsed. It was a horrible tragedy. As of July 21, 97 people have been declared dead, with searches are still being conducted for other missing persons. The tremendous loss of life after such an unexpected event has rattled the area. It has also caused property owners, engineers, contractors, developers, and officials across the country to take a closer look at their own policies and procedures to try to ensure similar disasters do not occur in their communities.
The exact cause of the collapse is still unknown. While officials study what went wrong, we wanted to take a closer look at some of the insurance issues that may result. It has been estimated by some that there is approximately $48 million in insurance coverage available to the Association under policies currently in place. Whatever the case, the losses arising out of this tragedy are almost certain to dwarf the applicable limits.
This tragedy highlights the complex interplay of different coverages and policies that, depending upon the ultimate cause of the loss, the responsible parties, and their respective insurance programs, will ultimately dictate just how much might be available for the victims of this event.
The Condo Association and its Board of Directors
Homeowners associations are typically required, whether by their governing documents or by applicable statutory (or, in some states, common law) duties, to obtain and maintain insurance programs. While these requirements may vary, the types of coverages typically maintained by homeowners’ associations includes commercial general liability (CGL) policies, directors, and officers (D&O) liability policies and property insurance. With respect to the CGL and D&O coverages, many associations will also obtain umbrella and/or excess liability policies. The CGL policy protects the association from, among other things, bodily injury and property damage claims brought by injured third parties. The D&O policies will protect the individual members of the board of directors (and in some cases the association itself) for liabilities to third parties arising out of, among other things, the management of the building and its common areas. Umbrella and excess policies will, at the least, provide additional limits for the policies over which they are underwritten. The property policies protect the association for the property damage itself has sustained. The amount of policy benefits property policies may pay toward a loss may depend on whether the project is re-built or not. In this case, every one of these coverages are implicated by this catastrophic loss.
It has been reported that the board of directors for Champlain Towers South procured $48 million in coverage under several different insurance policies that would provide compensation should a disaster happen. However, it is possible some of these policies may not be applicable, depending upon the cause of the collapse and the extent of the board’s awareness of the factors leading to the collapse.
The Engineers Involved in the Recent Inspections of the Project
Given the catastrophic size of this tragedy, including the near certainty that the total losses will far exceed available insurance for the association, it is to be expected that injured parties will make every effort to cast responsibility far and wide. There were engineers involved in the recertification effort. If they are potentially responsible in some form or fashion, claims against them would likely implicate (at the least) their professional liability coverages. However, the applicable limits on most professional liability insurance programs are oftentimes more limited, especially in comparison to the likely size of the claims at issue here. Another factor at play here is the potential existence (and enforceability) of contractual limitation of liability provisions in the agreements between the engineers and their client.
Contractors and Construction Companies
Those contractors who worked on the property in or around the time of the collapse may also potentially find themselves in litigation. There were a series of repairs being planned and, undoubtedly, questions will be asked about what was discovered (or should have been discovered) during the inspections that had presumably been conducted prior to the collapse. To the extent any work was done, questions will undoubtedly be asked about that work and whether it had an impact in the cause of the loss. Such claims will potentially implicate at the least the CGL and professional liability insurance programs maintained by the involved contractors, as well as their respective umbrella and excess liability programs.
Questions have also been asked about the construction of the neighboring condo tower and whether it may have played a role in the collapse. It has been reported that construction activities (and maybe even the design) of the neighboring tower may have impacted the Champlain South Tower. The risks associated with the development and construction of the neighboring tower may well have been insured through a wrap-up. Wraps vary in terms of the types of coverages that they afford. Most common is CGL coverage. But, some wraps, whether as part of the CGL program or through an entirely separate insurance tower, provide professional liability coverage, too. If such claims are made against those involved in the design and construction of the neighboring tower, the claims will likely implicate the CGL and professional liability coverages of the involved parties.
Property Owners and Renters
The unit owners within the Champlain Towers South (and their renters) have claims for the damage to their property. Such claims implicate their respective homeowners’ and renters’ policies. Some insurance policies may require that policyholders purchase additional coverage to guard against certain events, such as sinkholes or other forms of earth movement. The cause of the collapse could have a significant impact upon the ability of some insureds to recover policy benefits under these types of policies.
The cause and origin of a loss is always a key factor in determining which parties are potentially responsible, as well as which of those responsible parties’ insurance programs might be implicated. Officials are going to determine why they believe that the building collapsed. Extensive efforts are already underway to document the evidence at the scene, so that it can be closely examined in an effort to learn what happened. That said, such high-profile investigations take time and lawsuits have already begun. It is quite possible, if not likely, that the lawsuits will proceed more quickly than official investigations. In any event, official determinations regarding cause are not necessarily determinative or binding on parties to litigation or in subsequent or associated coverage litigation.