Hurricane-Related Litigation Still Howling in Florida Courts
by John Pacenti
Daily Business Review
July 12, 2007
The 2004 and 2005 hurricanes are still howling in Florida courts.
One large insurer, Sydney, Australia-based QBE Insurance Corp., is the target of a maelstrom of litigation filed by condominium associations claiming it has stonewalled legitimate claims with the intent of forcing lowball settlements.
There are at least 21 hurricane-related suits against QBE pending in federal courts in Florida, another dozen waiting in state court to be transferred to federal court and several soon to be filed. QBE is the state's top condo association insurer.
Breach of contract lawsuits against QBE have been filed by several Florida condominiums, including Tiara Towers in Riviera Beach claiming $8 million in damages, the Village Spires in Vero Beach claiming $22 million in damages and the Chalfonte in Boca Raton with $12 million in damages.
Daniel Rosenbaum, managing shareholder of Becker & Poliakoff in West Palm Beach, Fla., which represents many condo associations, said he is handling almost 30 claims against QBE. Some have gone to litigation, such as the Chalfonte case, which is heading to trial. Others he has resolved, while some he is readying for litigation.
Rosenbaum said that from QBE's perspective, stalling equals cash, especially for a corporation that reported a 2006 net profit of almost $1.5 billion. "Everyday they hold on to their money they are making money," Rosenbaum said. "They certainly seem to fight for every dollar."
But QBE attorneys argue their client is the big victim, not QBE policyholders. QBE said it has settled most storm claims from the hurricanes in 2004 and 2005, but it is contesting the rest. It alleges massive fraud by out-of-state adjusters who gave QBE policyholders reason to expect multimillion dollar damage payouts when they were only entitled to thousands or tens of thousands of dollars in damages.
"Many claims that were presented appeared to be inflated, exaggerated and unfounded," said C. Deborah Bain, a North Palm Beach, Fla., solo attorney who is representing QBE along with William Berk of Berk Merchant & Sims in Coral Gables, Fla.
Bob Freemon of Freemon & Miller in Tampa, Fla., who represents Tiara Towers Condominium Association, disagrees. He said QBE adjusters threatened litigation from the start when condo associations make legitimate storm damage claims.
QBE then searches for differences in statements between condo board officials or residents to make a case for fraud or to deny the claim through a loophole, he said. If QBE can prove fraud, it can void the insurance policy all together, and that scares clients into taking 50 cents on the dollar, he said. That makes the condo associations' "knees buckle," Freemon said.
CONDO ASSOCIATIONS GIVE UP
QBE is the top private insurance carrier in the state for condo associations, writing windstorm damage policies for 1,707 condo associations. QBE insures $19.2 billion in property, according to state records. State Farm Insurance is second, insuring 1,131 condo associations.
Although perhaps not known as a big insurer in the United States, QBE has massive with worldwide operations. The 121-year-old company specializes in property and casualty, health, and trade credit. In Florida, the company operates through Intercoastal Underwriters in Coral Gables, which is owned by Daytona Beach, Fla.-based Brown & Brown, the seventh-largest independent insurance broker in the world.
From 2005 to 2006, complaints against QBE rose from 18 to 50, according to the state Department of Financial Services. So far there have been 17 complaints filed in 2007.
Berk, QBE's lawyer, said because his client insures sizable condo complexes, there are often large claim that allow a lot of room for dispute.
Despite QBE's fraud defense, the lawsuits continue to pile up in Florida. QBE certainly doesn't seem to be flinching in the face of the litigation.
In the one case, QBE settled a $38 million claim by Tower 1515, a 40-year condo building in West Palm Beach for just $2.2 million. The settlement was reached after a nonbinding trial in front of an advisory jury ordered by U.S. District Judge Daniel T.K. Hurley. The jury found QBE did not breach its insurance contract and that Tower 1515 had committed insurance fraud.
"My position if it's damaged by the wind, it should be paid," said Berk, who tried the case with Bain. "But with this case, we felt they were claiming things that weren't damaged by the wind and shouldn't be paid -- windows that weren't working and sliders that had already been leaking."
Paul Orshan, a partner at Duane Morris in Miami, said he and a team of lawyers are readying a lawsuit on behalf of the 600-unit Arlen House East Condominiums in Florida's Sunny Isles Beach. The condo association has filed about a $26 million claim with QBE, citing extensive wind and water damage from Hurricanes Katrina and Wilma in 2005, according to its association's president, Gustavo Miret.
QBE's delay often works because condo associations ultimately will accept the lowest possible settlement offered during mediation given that building damages are festering and loans taken to make basic repairs are coming due, Orshan said.
"These are mostly elderly people and they have had to pay thousands and thousands of their own money and their building is still in disrepair," Orshan said. "What happens is that the condominium associations get frustrated and take a settlement just to get done with it."
Robert Reynolds, a lawyer with the Merlin Group of Tampa who has filed six suits against QBE, said it's part of QBE's basic strategy not to pay the condo associations for damages that are clearly hurricane-related. "What they are doing is trying to grind down the members of these communities and that's what they do pretty much in every case," Reynolds said.
In April, Reynolds held a news conference in which he brought together about 30 condo associations and state Sen. Jeff Atwater, R-North Palm Beach, who is on the House Banking and Insurance Committee, to criticize QBE. Atwater called the situation "institutionalized bad faith."
QBE BLAMES ADJUSTERS
Reynolds said QBE typically sends out its adjusters who tell condo associations their damages don't exceed their deductible. The associations then hire their own adjusters to challenge that. QBE counters by saying the damages are from neglect or wear and tear.
After about a year of back of forth between adjusters, Reynolds said, QBE lawyers demand maintenance records going back many years. QBE then asks to interview unit owners who have water damage or roof leaks of any kind, going back as many as six years. "They look for fraud in every case," Reynolds said.
Bain, the attorney for QBE, said the main problem is that outside claims adjusters came to Florida after the 2004 and 2005 hurricanes with the sales pitch to condo associations of "no recovery, no fee." She said the adjusters fraudulently tried to transform claims worth thousands of dollars into multimillion-dollar claims.
But Miret, the president of the Arlen East Condominium Association, doesn't buy that. He said Arlen House unit owners are struggling with the costs of legitimate storm damages.
Miret said the association has taken out $24 million in loans for repairs required to meet building code. Damages include compromised doors, sliding glass doors, dry wall, carpeting and cooling towers for the air conditioners. Other damages included about 50 percent of the glass structure, plus electrical and landscaping work. He has 180 pages listing items that need repair.
QBE "hasn't paid us anything," Miret said. "I've provided documentation, but they keep insisting they want more. At least give us money for the damages that we know for certain. Give us some money so we don't have to keep assessing the owners. But they just keep laughing at us."
Miret said he has started to assess liens against some tenants who cannot afford to pay the assessments. There have been two assessments totaling $7 million.
"The fire department doesn't care," Miret said. "They want things fixed. What has happened is the elderly [residents] have had to take out equity lines. They have had difficulty making ends meet. It has actually created quite a sell off on a lot of the apartments."
Orshan said he has made the condo's board members available to QBE for sworn interviews, as requested by the insurer, but has received no response. Orshan said he's ready to sue. QBE "knows there are legitimate damages to the building and still they pay nothing," he said.
But Bain said it's completely wrong to say that QBE is stalling to force condo associations to take the lowest settlement offer. She said that in the Middle District of Florida, the Horizon Condominium Association in Daytona Beach dropped its $6.7 million claim and accepted a $395,000 settlement.
"Would the policyholder settle the claim for $395,000 because QBE waited them out?" Bain said. "QBE will not pay inflated or fraudulent claims."
United Policyholders is a non-profit organization founded in 1991 and dedicated to educating the public on insurance issues and consumer rights. UP publishes educational materials and serves as a resource for individual and business policyholders and residents of communities with insurance problems. UP’s Amicus Project provides information to courts of law to support policyholders’ legal rights. UP unites policyholders and their advocates by sharing information. Write to UP at 110 Pacific Ave., PMB 262, San Francisco, CA. 94111, call us at (510) 763-9740, or visit our website at www.unitedpolicyholders.org.
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