Stenographer's Transcript of Video
Case Title: Three Palms Point Success Story
Part Twelve: Conclusion
Transcribed by: Stenoproof

Having concluded the 12-unit pilot project at Three Palms Point Condominium Association, I wanted to take a little time today to discuss where we have been, where we are today, and where we're going to go with this claim hopefully in the future.

As we all know, Three Palms Point, in a survey of the building, discovered serious hidden damage to structural members of this building. Upon finding these damages, my firm was contacted, and subsequently I was hired to assist them in this claim process. We then put State Farm on notice of the claim, and State Farm, after conducting a very lengthy investigation, concluded that, based on the facts that they had found at Three Palms Point, not only factually as far as the structure goes, but as well as in the records, that coverage should be afforded for this collapse/hidden decay claim. State Farm then determined, unilaterally, that based on their experts, at that time, the knowledge and information that was available, that this loss would be approximately $500,000. We, on the other hand, looked at damaged areas, made what we thought to be a reasonable extrapolation, and presented a claim which was contained in this booklet for $3.8 million. Unfortunately, both sides were wrong in this process.

As events have unfolded, as we progressed forward in this claim, we have discovered that there is asbestos in the building, we have discovered that there were additional damages above windows that were not previously contemplated, we've discovered that fasteners attaching the stucco cladding to the metal studs are impaired and will be further damaged in removal of the stucco, on the lower sections where the studs had been rusted. The damages have only gotten worse as we have progressed in this process. We now know what the loss and damages are to these 12 units, and based on a reasonable extrapolation, we can say we feel that this is going to be the end result as far as the cost to repair this building.

The numbers, as they have been presented today, based on an audit - I have gone through change orders that have been submitted, payment requests, notations from the contractor and the engineer, reflects that those 12 units, total, in our view, after giving credits where credit is due to State Farm, an amount of $635,607.49. Using that number and applying an extrapolation based on what we have found to be damage versus the total lineal feet of the whole building, we've extrapolated these numbers out for a total repair cost of $13,402,893. Of course, State Farm has previously paid approximately a half million dollars, so a credit would have to be given off that amount of money.

Items in the construction of the original 12 pilot program that were not asked or considered in this included upgrades for electrical work, new sliding glass doors, new windows and structural plywood sheathing that was not in place but the Association has elected to go ahead and put back in their repair process. None of these items, which would be excluded under law and ordinance coverage in the policy, are included in these figures.

We at this time feel that the empirical evidence is in. We now know, based on this pilot program, what the cost of this project should be in its entirety. As insurance professionals dealing with property claims, I don't think anyone could disagree that collapse claims are the most difficult claims to resolve. The difficulty, of course, is the fact that the granted coverage requires the damage to be hidden. Clearly, in the Three Palms Point case, the damages were hidden. State Farm granted coverage for the peril of collapse.

Based on my experience in doing collapse claims, I have found that the only way that you can resolve the issue of loss and damages is one, to fix the entire building; you then have a sum certain amount, or two, you do as we did in this case, a reasonable extrapolation based on repairs. Call it a template, a pilot program or what you want, but you've actually repaired units and came up with a figure based on what has been found to be done. We then applied this extrapolation to get to the bottom line.

I think that the uncertainty in this case has been removed. We now know, we all agree, it was done under the supervision of an engineer, State Farm had the opportunity to inspect it, the building officials had the opportunity to inspect it, and of course, the contractor had to perform his job, and all of that has resulted in these repairs being made at this cost, and using this reasonable extrapolation, we've arrived at this figure for the loss and damages that occurred at Three Palms Point.

State Farm and Three Palms Point throughout this process have worked together. There has been a meeting of the minds as to units that needed to be done, coverage has been granted, and I'm very optimistic, based on the evidence that's been presented here, that we can get this case settled in a timely and equitable manner.

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