Soon after the deadly collapse of a Surfside condo tower, dozens of victims and their relatives started filing lawsuits accusing the building’s condo association and its engineering consultant of causing the tragedy because they failed to keep the oceanfront structure safe. Now two major insurance companies are using that same argument to deny huge coverage claims by Morabito Consultants, which was hired by the Champlain Towers South condo association to inspect the 12-story building and come up with a structural renovation plan long before it partially fell down in June.
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Judge Michael Hanzman speaks during a hearing to discuss the litigation involved with the collapse of Champlain Towers South at Miami-Dade Children’s Courthouse, July 14, 2021. |
Both insurers have not
only rejected Morabito’s insurance claims but also those of
the Champlain Towers South condo association, which was
covered under the engineering firm’s policy too. The two
insurers’ refusal to honor their policies with the Champlain
condo association under Morabito’s coverage stands in stark
contrast to several other insurance companies that have
already agreed to pay in full the association’s property
damage and personal injury claims, totaling about $50
million. A spokesman for Morabito Consultants, Brett Marcy,
blasted the two insurers for denying the claims. The
engineering company “believes all relevant and necessary
parties should be included in any litigation related to
insurance coverage,” he said. “That includes the condo
association and those parties representing the victims.” The
leaders of a team of lawyers in the Champlain class-action
case, though adversaries of Morabito and the condo
association, agreed with that approach.
“Insurance proceeds are critical to compensate the victims
of this tragedy,” said Miami attorneys Harley Tropin and
Rachel Furst, who are among the team of lawyers heading the
class-action case against the Champlain condo association.
“The insurance companies that insured those that played a
role in causing the collapse have an obligation to honor
their commitment and to provide coverage.” Miami attorney
Stephen Binhak, who represents developers with condo- and
construction-related matters but is not involved in the
Champlain cases, said that while the collapse of the
Surfside high-rise is an extraordinary situation, the legal
fight between the tower’s engineering consultant and its
insurers is commonplace. Sharp differences arise not only
over insurance coverage and “exclusion” provisions, but also
over the amount of the payouts based on liability, caps on
damages and other factors — including the number of
accidents. In the Surfside case, for example, the building
partially collapsed on the night of June 24 and the
remaining structure was later demolished for safety reasons.
“Litigation over insurance coverage and claims is normal —
you see it all the time,” Binhak said. ”Initially, there is
the question of whether a policy covers a claim. If so,
there is the question of how much insurance is ultimately
available. Larger claims increase the chances of a lawsuit —
especially when the damage may exceed the policy limits.
“After the World Trade Center collapse in 2001, with
billions of dollars of insurance on the line, there was a
lawsuit to determine whether the attack on the towers was a
single ‘occurrence’ or two separate ‘occurrences’ for the
purposes of insurance coverage,” Binhak he said. “Even with
that level of insurance in place, the federal government
stepped in to make funds available to compensate victims,”
referring to the massive litigation that followed the 9/11
terrorist attacks on the twin north and south World Trade
Center towers. Morabito, a Maryland-based firm, was hired in
2018 by the Champlain Towers South condo association to
provide a structural safety inspection and renovation plan
for the 40-year “recertification” of the 8777 Collins Ave.
property. Morabito found “major structural damage” to a
concrete slab in the pool area and “abundant” deterioration
of garage columns supporting the condo tower, but the
association did not move forward on Morabito’s restoration
plan until just before the building partially collapsed. In
the aftermath, Morabito Consultants was sued by its two
insurance companies, National Fire Insurance Company of
Hartford and Continental Casualty Company. The companies,
known together as CNA, have denied Morabito’s insurance
claims and also refused to defend the engineering consultant
against 19 individual lawsuits brought by Champlain Towers
South condo owners. Morabito is also expected to be sued in
the ongoing class-action case representing most of the
victims in the condo collapse. In their lawsuit, the two
insurance companies claim that the liability coverage
provided under Morabito’s policy does not apply to bodily
injury or property damage “caused by the rendering or
failure to render any professional service.” CNA says the
coverage, dealing only with Morabito’s engineering services,
is excluded from its “primary” and “umbrella” insurance
policies between 2017 and 2021. Also, the insurers denied
coverage to the Champlain condo association, which was added
to Morabito’s policies in recent years. CNA’s lawyers, who
filed the firm’s suit in Maryland federal court, did not
return phone and email messages for comment. Morabito
Consultants fired back, filing a motion to dismiss CNA’s
federal suit. The consulting firm’s lawyers argue among
other things that the coverage matter belongs in the
Miami-Dade Circuit Court where all of the parties affected
by the Champlain tower collapse are fighting over liability
and damage issues.
In fact, the engineering firm filed a lawsuit in Miami-Dade
Circuit Court against its two insurance carriers as well as
the Champlain condo association and the building’s
individual owners who sued them. The reason: They all have
an interest in Morabito’s coverage with CNA. Morabito’s
lawyers assert the insurance companies have no legal basis
for denying the consulting firm’s claims for property losses
and deaths in the condo collapse. They argue the firm’s
engineers performed their “professional services” for the
Champlain condo association and that its insurance coverage
must be interpreted broadly not narrowly. “CNA has ignored
settled law governing the interpretation of insurance
policies and the duty to defend and has wrongfully refused
to defend Morabito against the [condo owners’] lawsuits,”
Morabito’s suit says. “Moreover, any allegations that could
be construed to assert a failure to perform inspection or
engineering services are contradicted by allegations that
acknowledge Morabito properly performed inspection and
engineering services and identified and reported serious
structural issues to the [condo] association,” the suit
says. The Champlain condo building, completed in 1981, was
facing a formal structural, mechanical and electrical
review, as required under Miami-Dade’s building code nearly
40 years later. Morabito Consultants was hired by the condo
board in 2018 and produced a nine-page inspection report,
which was an initial summary of its structural findings. The
estimated initial cost of repairs was heavy — $9 million — a
price tag that caused dissension among board members and
rose significantly to $15 million as the association delayed
the repairs for almost three years. Morabito was also
retained to prepare and oversee the restoration plan, which
got under way starting with the replacement of the Champlain
tower’s roof just before the collapse in June. Although
Morabito’s initial report did not raise an obvious red flag
that the building was “unsafe” or at risk of falling down,
the firm did urge Champlain’s condo board to replace and
repair the deteriorating structural areas in the pool and
garage areas in a “timely fashion” because the concrete
problems could “expand exponentially.” Under Miami-Dade
County’s building code, “a building, or part thereof, shall
be presumed to be unsafe if ... there is a deterioration of
the structure or structural parts.” The ordinance further
states that “the [local] Building Official, on his own
initiative or as a result of reports by others, shall
examine or cause to be examined every building or structure
appearing or reported to be unsafe.” But after Surfside’s
building official was sent Morabito’s engineering report by
a Champlain condo association member, the official met with
the board after reviewing the document and assured members
that “it appears the building is in very good shape,”
according to minutes of a Nov. 15, 2018, board meeting.
Several structural engineers, after evaluating public
records, condo plans and video footage of the collapse, told
the Herald that they suspect the Surfside tower began to
fall after the pool deck caved into the parking garage,
which in turn undermined the structural integrity of the
tower and triggered the collapse of the middle and
oceanfront sections of the building. However, the exact
cause of the collapse, under investigation by local and
federal authorities, is still not known.
In the months after the tragedy, Miami-Dade Circuit Judge
Michael Hanzman has tried to steer the litigation in the
direction of recovering and raising as much money as
possible to compensate the hundreds of victims — including
condo owners and those who died. So far, with the help of
receiver Michael Goldberg, who has taken over the Champlain
condo association’s role, the judge has managed to recover
$30 million in property coverage and $19 million in personal
injury coverage from the association’s various insurance
carriers — all of whom immediately agreed to honor their
maximum policy coverage, unlike CNA, which refuses to pay
out anything. In addition, the now-vacant, nearly two-acre
Surfside property fetched an initial bid from a private
developer of $120 million. Higher bids could be offered for
the lot, where there are plans for a luxury condo high-rise.
But dividing up those funds has been difficult because of
the tragic ordeal. Hanzman assigned a mediator to figure out
how to compensate both the Champlain condo owners and those
who died in the collapse. But the mediator, lawyer Bruce
Greer, said he has been unable to bridge the gap, with some
condo owners saying they should receive all the money and
the families of deceased residents saying all the funds
should go to them. Whatever money might be recovered from
third parties, such as Morabito’s insurance carrier, CNA,
would be added to the total pot of compensation. “There is a
heavy divide between the two sides,” said Martin Langesfeld,
whose sister, Nicole, and her husband, Luis Sadovnic, died
in a Champlain condo unit owned by Langesfeld’s
grandparents. “They think we deserve nothing when we think
we deserve everything.”