Former Horizon West resident says neighbors disappointed in ruling

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WAUKESHA — Laurel Peterson, a former resident of the Horizon West Condominium Homes, said she and the exneighbors she’s spoken with are disappointed after federal courts twice ruled against them in their dispute with their insurer following their evacuation from their homes almost two years ago.

'Everybody that I’ve talked to was very disappointed. They had high hopes it was going to get overturned through the appeals court," Peterson said Wednesday. "It was a letdown but also not completely unexpected since we had already lost the initial lawsuit in the federal court. So it’s something we were kind of bracing for but hoping that somehow that wouldn’t be the case."

Dozens of residents were displaced suddenly from the sixstory building on North West Avenue on Dec. 2, 2021, under order by the city when the building was deemed unsafe.

After balconies were removed following the discovery that they were unstable, it was learned structural steel had rusted both in the balconies and in the beams and crossbeams giving the building its structural integrity. Engineers concluded water of unknown origin got into the building and caused significant rusting of the structural steel.

See CONDOS, PAGE 8A

Laurel Peterson is seen looking at what’s left of the Horizon West condos Wednesday. The U.S. 7th Circuit Court of Appeals decision has upheld the ruling of a lower court which found the insurance company did not have to cover the losses the homeowners association suffered after they were suddenly evacuated from their homes almost two years ago. Peterson said she is among the former residents considering filing for bankruptcy as a result.

Brian Huber/Freeman Staff From Page 1A

The residents and the Horizon West Condominium Homes Association sued in federal court after Traveler’s Indemnity Company of Connecticut denied them relief under its policy covering the building, estimated to be worth $17 million. U.S. District Judge Lynn Adelman dismissed the residents as individual plaintiffs and agreed with Traveler’s argument that exceptions in the policy applied, one being an exception to covering losses caused by local ordinance or law. Adelman also found that the policy contained exclusions to coverage for rust or other corrosion damage, collapse or loss of structural integrity also applied, as did an exception for any municipal orders or ordinances that removed the people from their homes.

Residents appealed the matter to the U.S. District Court of Appeals, which last week upheld Adelman’s ruling, finding that exclusions outlined in the policy applied, that whatever caused the damage to the building occurred before the policy took effect, and that the association’s claims that Adelman’s ruling went against state public policy was erroneous. The plaintiffs’ attorney, Michael Ganzer, argued that the policy would trigger coverage if the building suddenly collapsed, but not if the building was deemed in danger of collapse, leading residents to remain in an unsafe building to obtain coverage.

But the Court of Appeals rejected those claims, saying prior notice that the building was in danger of collapsing would mean that any collapse would not be covered.

"The district court was right to conclude that both the language of the policy’s exclusions and its temporal limits foreclose coverage here," the three-judge 7th Circuit panel wrote in its opinion. "Though mindful of the emotional and financial hardships this litigation and the events underlying it have caused the Association’s members, we must give effect to the policy’s plain terms, which as the district court correctly held, do not supply coverage for the claimed losses."

The Freeman was unable to reach attorneys Ganzer for the plaintiffs and Michele Chapnick for Traveler’s for comment Wednesday.

Chapnick argued in a brief in the appeal that it was clear that the the building was unstable before the policy became effective in May 2021 because flaws were documented in a city inspection in 2020. She said while there "is no question" the city’s evacuation and raze order were "devastating" for Horizon West residents, Adelman made the right call under the law.

Peterson said a meeting of the condo owners association to discuss the reaction to the decision has yet to be filed. The next step in the matter, if any, is undetermined, as residents just found out this week about the appeal decision reached last Friday.

Ganzer previously told The Freeman that some of the displaced condo residents were considering filing for bankruptcy, but have decided to wait until the outcome of the appeal before moving forward so as not to complicate things.

Peterson said several of the residents moved into the condo after selling their single-family homes, intending to remain there, and some lost years of equity. She said she knew one of her former neighbors who retired the very day of the evacuation order, and had to unretire as a result.

She said she is one person planning to file for bankruptcy.

"Everybody is in a little bit different of a situation. I am one of the ones that is going to file for bankruptcy so for me when I found this out, it basically meant OK, now I can start the process of bankruptcy because while the lawsuit was still going on, filing would have created some logistical difficulties. So in some ways for me, I am just glad there is a decision because now it means I can start that process of starting over financially because I have been putting it off, but we do have a lot of residents who didn’t had their mortgages paid off or almost paid off and so for them, filing bankruptcy doesn’t make sense. It just means that they are out their complete investment, you know, as a result of this."

Making matters worse, the condo owners had to put up about $15,000 each to have the balconies removed, which depleted the reserves of many.

She said the entire affair is a reminder to condo owners to make sure they know their insurance policies inside and out.

The building is being torn down, with workers removing asbestos and other materials before the structure itself is demolished, expected to happen in the coming weeks. Peterson predicted the city taxpayers will shoulder at least some of the costs of the demolition. Under a settlement of a lawsuit brought by the city to raze the building, if the owners had prevailed on appeal, they would pay the costs of remediation and demolition. But because they didn’t, the city will cover the costs and put a lien on the property that must be satisfied before the site can be sold, Assistant City Attorney Miles Eastman told The Freeman last summer. A message left for Eastman was not returned Wednesday.

Peterson said she gets a virtually daily reminder of the predicament, as she picks her daughter up for school, who lives with Peterson’s ex-husband two doors down from the building.

"It’s sad although it’s nice to finally see something being done because for that year and a half or so that the building was just sitting empty, it was almost more difficult because we knew that the building was a liability issue at that point, like with squatters potentially breaking in. ...

"I actually do consider myself one of the lucky ones because I am still in my 40s and I’ve got a solid job so I do have time to recover, but it’s definitely not in the life plan," she said.