Surfside Condo Collapse Lawsuits Mount, With Just $50 Million for Payouts

Already, the limited pool of funds is pitting Champlain Tower residents who suffered only property damage against those who lost loved ones or suffered injuries that could have long-term consequences.

The insurance “will obviously be inadequate to compensate everyone fully to the extent of their horror,” Judge Michael Hanzman of the 11th Judicial Circuit of Florida said at an early hearing. “There’s going to be a very serious allocation issue between those people who tragically lost loved ones and were lucky enough to only lose property.”

The Champlain Towers South litigation is constrained by a conservative property-insurance policy and a push by the judge to resolve the lawsuits on an accelerated timeline. The main defendant isn’t a multinational corporation or a wealthy developer but the condo board, a nonprofit with limited financial resources.

Similar catastrophes, typically involving much larger for-profit companies, have led to settlements in the hundreds of millions or billions of dollars, said Chip Merlin, president of the Tampa-based Merlin Law Group, which specializes in representing insurance policyholders and is a co-counsel in the class action. After the collapse of suspended walkways in the lobby of a Hyatt Regency hotel in Kansas City killed 114 people in 1981, a class action yielded a roughly $140 million settlement, or some $420 million in today’s dollars. Boeing agreed earlier this year to a settlement of a criminal case that included $2.3 billion to airline customers and families of the 346 people who perished in two MAX crashes.

The Florida lawsuits allege that the condo board failed to protect the building’s residents by not making vital repairs and monitoring the Surfside, Fla., building for signs of disrepair that led to the collapse. Most of the lawsuits are expected to be consolidated in a class-action suit.

Michael Goldberg, the receiver appointed to manage the condo board’s assets, said in an email, “I don’t know if there is any amount of money that could adequately compensate these victims and their families for the loss of life and other injuries they have suffered.”

Judge Hanzman has also said the land that the building sits on could potentially be sold, which could fetch about $100 million or so, according to attorneys. Any sale would be complicated, given that some residents want the right to move back into units on a newly constructed property or to see a memorial on the site, according to attorneys.

The $50 million pool of potential compensation is composed of a $31.4 million property policy covering the building, and the condo association’s $18 million in liability coverage.

Estimates about the size of fair compensation are still preliminary, but attorneys said the $1 billion figure is based on lost earnings from people who perished, the loss of the 136 units that ranged in value from about $400,000 to about $2.9 million, compensation for trauma, and potential punitive damages a jury might award.

One problem, according to insurance-industry executives, is that while the building is insured in line with many other South Florida condo buildings, the policy limits are essentially designed to cover damage from, for example, a major hurricane—not a collapse requiring total reconstruction. So, proceeds could fall far short of what is actually needed to rebuild, or, if distributed across owners, what people would need to buy a unit elsewhere, the executives said.

Great American Insurance Co., part of American Financial Group Inc., issued the building policy in December and has pledged to pay the full policy limits, a company spokeswoman said.

Low property-insurance policy limits aren’t unusual in condos because they cost owners less in premiums, said Howard Sharfman, Delray Beach-based senior managing director at broker and consultant NFP Insurance Solutions, which works with many condo associations in Florida.

Based on the current cost of construction in South Florida, “the coverage seems inconsistent with the cost to clear the site and rebuild the structures,” he said.

Insurance-industry lawyers and executives said they expect plaintiffs’ lawyers to try to sue the original builders, contractors, architects, engineers and many others involved with the 40-year-old building.

Plaintiffs’ lawyers could face significant challenges, however, “not the least of which is the statute of limitations,” said Michael Menapace, an insurance-industry litigator who serves as a scholar at trade group Insurance Information Institute. Those generally run two to four years in Florida in regards to alleged negligence by design professionals, he said.

The one deep-pocketed defendant that plaintiffs attorneys may eventually target is Terra, the highest-profile developer behind a new Renzo Piano-designed condo tower next door, which residents complained in emails to the town at the time might have helped to destabilize their building.

“The facts will demonstrate that the collapse of the Champlain Tower South was caused by factors wholly unrelated to Eighty Seven Park,” the development’s spokesman said.

Residents who have homeowners insurance will be able to draw on their own policies to help cover the loss of value in their units and current living expenses. But Michael Clarkson, agency principal for Hilb Group of Florida in Clearwater and a longtime specialist in condo-association coverage, said many South Florida condo owners don’t own such policies because many don’t have mortgages that would require the protection.

Judge Hanzman has said he wants the case to be resolved within a year, an accelerated timeline for class-action lawsuits, which can take years to resolve. The judge has said he wants the insurance proceeds to go to the victims rather than be gobbled up in legal fees from protracted litigation.

Plaintiffs’ lawyers said they aren’t aware of any efforts to create the kind of government-backed fund that emerged after some other mass-casualty events. A couple dozen GoFundMe pages have raised tens of thousands of dollars for individual families, but nothing close to the amounts a class-action suit could leverage with a wealthy defendant.

Write to Laura Kusisto at [email protected] and Leslie Scism at [email protected]

Corrections & Amplifications
The value of units in the collapsed Champlain Towers South condo building ranged from about $400,000 to about $2.9 million. An earlier version of this article incorrectly said they ranged from $400,000 to about $1.8 million. (Corrected on July 29.)