Resident Wins Preston Tower Lawsuit; HOA Responsible for Damages

Preston Tower - Small

About a week ago I wrote about a lawsuit filed by an owner at Preston Tower against the HOA and Intercity Investments (ICI).  The case came about after a catastrophic flood in the building resulting from a blown water booster pump on the penthouse level that sent water cascading throughout the building.

It was decided by the HOA and their management company that the costs to repair damages to individual units was to be passed on to individual’s homeowner’s policies instead of making a large claim against the building’s blanket insurance policy.  Court documents show an email from the building’s insurance company to the HOA board and Intercity Investments suggesting the move to avoid paying the building’s $25,000 deductible.

See this partial email from Rod Medlin of Scarbrough-Medlin Insurance:

Hello Doug and Sandra, [Doug Mertz, GM of Preston Tower and ICI employee; Sandra Gotterup, SVP at ICI]

The situation is that if it is covered under the master property policy it is subject to a 25K deductible. The cheapest and easiest route to be restored for the owner is to simply turn that claim into their HO-6 Policy which has a small deductible. Usually $ 500. If the Association is ultimately responsible for the loss those personal lines companies would seek redress and return your deductible in their recovery.

It appeared to be a successful strategy that homeowners bought … until one owner, Tatiana Frierson, said “no” to that. She claimed that if the building caused the damage, they should pay. (I’d agree, it’s what building insurance is for.)

After nearly two years of winding through the legal system, on Dec. 14 (this morning) 193rd District Court Judge Carl Ginsberg agreed with Frierson and granted her summary judgement.

I spoke with Frierson this morning and she feels vindicated by the win.  For the past two years, the building has distributed “information” about the case that Frierson thought was negative towards her claim. She thinks that, at least in part, it was done to intimidate her.

One claim made was that the building didn’t know the booster pump even existed and yet court documents show that when the unit behind which the pump was located was renovated by its current owner, the building asked to put an access panel into the wall for the pump.

I’m hoping those who bought into the building’s claims will now look upon Frierson as the only person willing to fight for their homeowner rights.  After all, the cumulative individual insurance policy deductibles surely added up to more than the $25,000 building deductible … meaning because the building deductible comes out of HOA dues, in raw money, the homeowners paid more.  Add in the attorney’s fees from Frierson and it’s obvious the only winner was Scarbrough-Medlin, the building’s insurance broker.

In the ensuing week since my original story, I’ve heard from many condo owners who were in the same position and each said they’d similarly won their cases.  So it appears there’s an ever-growing raft of case law examples where HOAs and their insurance companies are on the hook for the damages they cause.  It’s not OK to absolve yourself and pass the buck to owners.

While no one wants to sue their HOA (it’s in effect suing yourself), it’s important that HOAs do their job and execute their responsibilities to residents.

I suspect the big question is whether other residents who’ve already had their homeowner’s policy pay for their damages now seek repayment to their insurance companies from the HOA.  If their personal insurance premiums were raised because of the claim, I bet more than a few will try to get that claim erased from their records.  At the very least hit the HOA up for the deductible they paid.

One thing that can also be gleaned from this catastrophe and last year’s garage collapse at the Renaissance is the critical need for disaster procedures.  Preston Tower had none.  For one thing, maintenance staff only work weekdays, it took nearly an hour and a half to get someone on-site to turn the water off. Clearly were there basic training on these emergency procedures, the damage would have been a lot less.

My questions to my readers are simple. Based on their handling of this catastrophic event … Who is your management company? Who is your insurance broker? What are your disaster procedures?

Remember:  High-rises, HOAs and renovation are my beat. But I also appreciate modern and historical architecture balanced against the YIMBY movement.  If you’re interested in hosting a Candysdirt.com Staff Meeting event, I’m your guy. In 2016, my writing was recognized with Bronze and Silver awards from the National Association of Real Estate Editors.  Have a story to tell or a marriage proposal to make?  Shoot me an email sharewithjon@candysdirt.com.

4 Comment

  • I live in an ICI managed building and this kind of deferred maintenance and maintenance staff not being on call does not fly in my building and when there has been an issue one or both of our full time maintenance employees have been onsite almost immediately, at least within 30 minutes even at 2 AM for lesser emergencies than catastrophic flooding.

    I’m curious how much if any ICIs contracts vary in the amount of critical support that is provided and what else if anything Preston Towers had/has been skimping on.

  • Time to remove ICI from managing that building. The flood should never have happened. I managed maintenance on equipment for a living. ICI should be paying that deductible and the condo owners should think long and hard about keeping them. ICI was nearly thrown out 3 years ago (wise decision) when a coup occured by some condo owners to keep ICI. There has never been a third party review on ICI’s management of the building in their entire history at Preston Towers. The owners in that building ought to wise up. A conclusion could be drawn that the condo owners are getting fleeced and that it is only a matter of time before they get another catestrophic failure at that building if they do not switch out the management company there.

  • My opinion that it’s the board who makes these decisions against homeowners. It isn’t the management company. If the board refuses to pay for weekend maintenance workers, the fault lies with the board. If the board feels like screwing their neighbors, it happens. Management companies can only do so much — piss off the board and they fire you!

  • What I don’t understand is why at least one of the homeowner’s insurance companies didn’t intervene. I would have expected those companies to ask a few questions about the source of the damage. Then when they found out it wasn’t a broken pipe under the bathroom sink or disconnected line to the dishwasher they would have said we aren’t paying this isn’t our problem, the HOA needs to cover this. I mean, if I asked my car insurance to replace the rear bumper they would want to know why and then get the person who rear-ended me to pay. Am I missing something?