By Sabina Mollot
It was 28 months ago when the wrath of Hurricane Sandy caused the East River to rise 14 feet and barrel its way into Manhattan’s East Side. In Stuyvesant Town and Peter Cooper Village, the gushing water caused unprecedented damage, destroying the management office and flooding basements and garages. But according to CWCapital, its insurance company has still not paid over a third of what the owner believes is owed for the damage.
The suit, filed last Thursday, said Lexington Insurance Co. has only paid $60 million of the repair costs and estimated losses that the owner has claimed were actually over $95 million. Adding insult to injury, the insurance company is also trying to bring the entire amount, including what has already been paid, to appraisal.
In its complaint, which is over 100 pages long, CW said the insurer, despite having its agents examine the damage on site, has “capped what it was willing to pay, regardless of the costs of repair.” Additionally, “Lexington simply ignored PCV/ST’s pleas for payment while at the same time, acknowledging that they were covered.”
The suit, which was first reported by Law360, noted how employees on the property immediately started work on the repairs to minimize the inconvenience to residents, which CW said served to minimize business interruption losses.
CW had hoped to get the insurer to agree on a $100 million settlement but Lexington and agents for Lexington from an insurance industry adjuster called Vericlaim “rebuffed those efforts.”
CW said it has since refined its estimate to reflect newer information and now believes the actual costs from repairs and losses amount to $95,296,483. The owner said the insurer has been provided with access to the property’s employees as well as the related documentation. “PCV/ST has responded to reasonable, and many unreasonable requests for information by Lexington and Vericlaim,” CW wrote.
CW also wrote that the refusal to pay the full estimate is the result of an “incomplete” inspection that was conducted in 2013 by an insurance industry construction consultant called Wakelee Associates. “Based largely on Wakelee’s results,” Lexington informed CW that the loss and damage amounted to about $60 million. Close to $53 million of that has actually been paid out, which, with the $7,500,000 deductible, reflects Lexington’s $60 million estimate.
CW also said some of its costs have been challenged in cases where equipment had to be replaced rather than just repaired. CW defended its actions though, citing in one example the property’s heat controls. The system had controllers that were destroyed in many buildings when Sandy hit. A different type of system was then installed since the original one was no longer commercially available.
CW gave some other examples of not receiving all it believes the property was owed, including in work relating to replacement of all the buildings’ cast iron drain pipes, which had all gotten clogged with water and debris. When dozens of onsite plumbers couldn’t unclog them, contractors had to be hired to saw through concrete basement floors, which meant additional costs to replace floors, drywall, tile and other property. A year later, Wakelee “took the position they could have been unclogged,” said CW, adding that there were no objections when the work was being done. CW said Lexington also accused the owner of having a “premeditated plan” to replace them.
The document went on to list other things CW was stuck footing all or some of the bill for such as replacement of steel window and door frames that had been exposed to river water and had corroded, work at the old management office, now converted into apartments (specifically installation of equipment and furniture), damaged fire mains, asbestos removal from buildings, reimbursement for employees’ cleanup/repair work (since they were diverted from their regular duties to do it) and income loss from laundry rooms, garages and the fitness center.
CW is also attempting to block Lexington from pursuing appraisal.
A spokesperson for CWCapital said he couldn’t comment on pending litigation, and a spokesperson for Lexington didn’t respond to a request for comment.