By Tyler Berding, Founding Partner of Berding & Weil, LLP
On June 24, 2021, at 1:25 in the morning, half of the twelve-story Champlain Towers South Condominium complex collapsed without warning, killing 98 and instantly destroying millions of dollars of real estate. A few days later, the remaining tower was intentionally imploded as a safety measure. No additional loss of life, but many more millions in property loss resulted. There have been very few examples of spontaneous building failure in the United States, which makes compelling the many legal questions raised by this case. Here are just a few.
What legal recourse do the victims have?
This is a complicated question to answer. Multi-party, complex litigation is available and likely. But the building was constructed in 1981. Experts might eventually connect the failure of this building to mistakes made by those involved with its design and construction four decades ago. Making that connection will mean little to the victims if those responsible for the original construction are dead, out of business, and if any insurance coverage they carried so long ago cannot be reached—all likely to be the case.
Recent condo board members and managers may be available as defendants if the statute of limitations[1] has not run. In Florida, that’s two years for tort damage claims, and the timing runs from the date of the injury. We can expect attorneys for the victims to bring suit within that time period and reach back to those responsible for the maintenance of the building many years ago and more recently. Engineering experts who provided reports and opinions will likely be part of any litigation.
What Evidence is Necessary?
To recover from any available defendant, a victim must show that that defendant’s actions were the legal cause of the injury. Given the passage of time and the complexity of the construction, it will likely be impossible to pin the destruction of this building on a decision or action by any single person. A succession of boards of directors, property managers, and experts made numerous decisions and recommendations over four decades that could affect the performance of a building. The attorneys for the victims must show that a particular decision, action, or advice, or a combination of those actions, more likely than not, lead to its ultimate failure.
As several recent reports have stated[2], the original design and construction of the building are at least partially to blame for its failure. If a jury found that later actors’ decisions played only a minor part in the building’s collapse, it could also find they were not responsible. Florida is a “comparative negligence” state. This means that the plaintiffs’ actions will be compared to those of each defendant to determine the percentage of fault. And this is where it gets interesting.
Many of the potential plaintiffs owned units in the building. Failure to maintain is a common defense in construction defect litigation. Would refusal by the owners to fund necessary repairs mean that their damages would be offset by whatever percentage of fault a jury assigned to that refusal? Would a failure to discover massive corrosion, well after that corrosion had fatally compromised the integrity of the building and eventually causing its collapse, be considered a precipitating act sufficient to subject those responsible to liability? Would there also not have to be an opportunity to warn before liability could be assessed? And what warning? Maintain? Repair? Evacuate? These are just a few of the many intricate causation problems that the attorneys will face.
What are the Sources of Recovery?
The most likely source is insurance coverage. Coverage that is carried by the homeowners’ association, management companies, experts, and individual victims. Also, the property itself is said to have significant value. But the total of all insurance coverage, even if the carriers concede coverage, is unlikely to be sufficient to cover the extensive losses the victims have sustained. The amount of Comprehensive General Liability, Errors and Omissions, and perhaps umbrella coverage carried by the homeowners’ association will surely prove to fall far short of the total damages. The land itself is said to be worth maybe $100 million, but lienholders’ claims may take a significant portion of that.
The owner’s association may have the authority to pass any judgments against it to the individual owners as special assessments. Still, the aggregate of all liability insurance or loss assessment coverage carried by individuals will not provide enough to cover these extensive losses. And since most owners will probably also be plaintiffs, their liability claims against the owners’ association could be offset by their obligation under the governing documents to fund the association. Thus, in one sense, the owners would be suing themselves.
How Long Will Resolution Take?
This is far from a simple case. Technical and causation proof problems are rampant. The average construction defect case can take from two to four years to resolve. This matter, however, will likely take significantly longer given the difficulties inherent in proving fault, the number of plaintiffs and defendants, the very different roles played by each defendant, and the time the building existed managed by many parties. In addition, each defendant will file cross-claims against other defendants and maybe the unit owners. It is even possible that some plaintiffs may sue other plaintiffs/owners. An actual trial, assuming it was tried as a single action, could take many months, but preparation proceeding trial will take four or five years. More likely, this matter will settle, helped by an experienced mediator who will assist in marshaling resources and then setting up a procedure to allocate the available cash among the victims.
Will the Victims be Made Whole?
Not likely for many reasons above. The sheer size of the claims and the absence of a single responsible party, like a developer with significant insurance coverage, almost guarantees there won’t be enough to go around. If the assets available to compensate victims are inadequate, there is no mechanism for establishing priority among claimants.
And another class of “plaintiffs” will also assert claims—the lenders who hold mortgages on the individual units. In most states, those claims have priority over unsecured equity claims, such as those stated by the condo owner for loss of their property. To the extent there is cash from either insurance coverage, sale of the underlying land, or some other source, lenders are usually first in line to satisfy their liens. Of course, if a condominium unit is owned clear of any liens, this isn’t a problem, but equity which sits behind a lender’s lien may be illusory when there are limited sources of recovery.
This incident is tragic in so many ways. But, unfortunately, loss of life can’t be compensated adequately even if the resources are available. But here, with limited resources, a matrix of competing claims, and, sometimes, priority liens, many victims will not recover enough to compensate them for this catastrophic loss.
[1] Each state sets its own time limits or “statutes of limitation,” that extend for a specified time from the date of the injury.
[2] Putzier, Calvert and Levy, “Behind the Florida condo collapse—rampant corner-cutting” The Wall Street Journal, August 24, 2021.
