Courtesy of Palm Beach Post
Published September 30, 2006
two years to the day after Hurricane Jeanne forced them from their homes,
residents of the 1515 Tower on Friday were hit by a different kind of
Instead of continuing the legal battle with their
insurer, the board of the 30-story West Palm Beach condominium told
residents that they had agreed to a $2.25 million settlement — far less
than the $20 million they were seeking. The settlement was reached
Wednesday after an all-day mediation session with a federal magistrate.
"This is a far cry from the amounts claimed by
the association in this case," condominium association President Hani
Riad wrote in a letter to the owners of the 119-unit high-rise on South
But, he said, after a mock jury earlier this month
agreed with QBE Insurance that fraud and misrepresentation fueled the
condominium's insurance claim, the board felt it had no choice but to
settle the lawsuit.
While the mock jury's decision was merely advisory,
it gave the board and its attorneys a scary preview of what could happen
"We were advised by our attorneys that if QBE
prevailed on its fraud claim, the insurance policy would be declared void
and unenforceable," Riad wrote. "If the policy were void, then
there would be absolutely no recovery."
Further, if the condominium lost at trial, it could
be forced to pay QBE's legal bills, which were estimated at $1 million.
"Undoubtedly the information contained in this
letter will be highly disturbing to many owners," Riad wrote.
While he couldn't be reached for comment, his words
were prophetic. As word spread, residents said they were shocked and
saddened by the turn of events.
"It's really a shame," said unit owner Jen
Werner. "It breaks your heart."
Werner, who this week was moving into a new
condominium with an oceanfront view, said she wasn't aware a settlement
had been reached. While she said she has moved on with her life, she said
she felt for other residents who are financially unable to do so.
"I feel so sorry for those older people,"
Already residents have been assessed an average of
$63,000 to generate $7.5 million to secure the plywood-covered building
and keep creditors at bay. The city was threatening to order that the
building be demolished.
At a meeting last week, a city board approved an
estimated $250,000 to $400,000 plan to secure the building by late
November. At that meeting, one of the association's attorneys told the
board that residents were hopeful that a large recovery from QBE Insurance
would help them recoup the millions they have lost.
As it is, roughly $800,000 of the $2.25 million
settlement will be turned over to attorney William "Chip" Merlin
to cover his expenses in preparing for what was expected to be a nearly
Merlin was reluctant to discuss the settlement. But,
he said, the decision of the mock jury was a blow.
"I was very disappointed by the finding of the
mock jury," he said. "Orally, they said they wanted to rule in
favor of the association. They felt sorry for the people. But the
association's own documents indicated that most of the building items that
had to be replaced after the hurricane also had to be replaced before the
QBE Insurance obtained letters dating back to 1976
from residents complaining about poorly installed doors and windows that
allowed rain to pour into apartments. There were also engineering reports
that noted structural problems, such as rusted metal studs, existed far
before Hurricane Frances struck on Sept. 5, 2004 to be followed 20 days
later by Hurricane Jeanne.
"It was a very difficult situation,"
But there may be some hope for residents. Last week,
Riad said another buyer has been found.
In July, Palm Beach developer Thanos Papalexis
reneged on a $56 million deal to buy the building.
The new buyer, whom Riad declined to name, has
offered $36.5 million. He said he expected contracts to be sent soon for
owners to review.
Merlin said the cost of repairing the building was
estimated at $32 million.