Waiea tower developer sues 7 insurance companies

Dec. 16--A tangled mess of litigation surrounding the construction of what has been dubbed the most sophisticated residence in Hawaii just got bigger.

The developer of the 36-story Waiea condominium tower at Ward Village in Kakaako filed a lawsuit Thursday against seven insurance companies over their treatment of an extensive water damage claim before the building was finished late last year.

Howard Hughes Corp. contends in the suit that the insurers are trying to avoid covering more than $1.5 million in damage caused by rain.

The insurers contend that a deductible in excess of the damage value applies because the rain was from a tropical storm.

The case adds to a flurry of recent lawsuits over the tower's construction for more than $300 million.

On Nov. 21, Hughes Corp. sued Waiea's general contractor, Nordic PCL Construction, claiming more than $75 million in damages and alleging that Nordic did substandard work, missed deadlines and went over budget.

Nordic responded with a lawsuit against Hughes Corp. on Dec. 1 saying the developer was responsible for the budget and deadline overruns, and that Hughes Corp. refused to pay Nordic $39.7 million for work even though nearly all the condos were sold for $3.6 million on average.

Two Waiea subcontractors, Critchfield Pacific Inc. and BEK Inc., also sued Hughes Corp., claiming they weren't paid for work.

Hughes Corp. is estimated to have collected roughly $575 million from buyers of units in Waiea, which means "water of life" and features a wavy glass facade on one side.

In the new lawsuit, Hughes Corp. is clashing with Ace Insurance Co. of Pennsylvania, Allianz Global Risks of Illinois, North American Elite Insurance Co. of Delaware, Princeton Excess and Surplus Lines of Delaware, insurance underwriters affiliated with Lloyd's of London, Starr Surplus Lines Insurance Co. of Illinois and Ironshore Specialty Insurance of Arizona.

The suit said rain poured into Waiea on the night of July 24, 2016, five months before the tower opened.

According to the filing in state Circuit Court, rain overwhelmed roof drains, and water infiltrated the building. The developer filed an insurance claim, but an adjuster said a hefty deductible would apply because the damage was caused by a named windstorm, Tropical Storm Darby.

Tropical storm damage was covered under the developer's policy, but included a deductible equal to 2 percent of the insured property's value, or more than $4.9 million, according to the filing. A high deductible exists because damage from a powerful storm would likely be more extensive and costly to cover.

Waiea's insurance policy also covered losses from water damage with a $100,000 deductible, and losses resulting from rain with a $250,000 deductible.

Hughes Corp. contends that Darby wasn't the proximate cause of the water damage. Specifically, the complaint said the damaging rain on July 24 wasn't associated with maximum sustained winds of at least 34 knots, or 39 miles per hour, which is the minimum speed defining tropical storms.

Yet a November 2016 report by the National Oceanic and Atmospheric Administration describes Darby's wind speed at 35 knots for all of July 24 and through 6 a.m. July 25 before a downgrade to an unnamed tropical depression at noon July 25 at 30 knots.

A separate NOAA report said: "Even though the center of Darby missed both Oahu and Kauai during transit, some of the worst impacts from Darby were felt on Oahu as a band of torrential rainfall set up over metro Honolulu for several hours on July 24th. This heavy rainfall resulted in major flooding impacting main transportation routes as well as low-lying business and industrial areas in the Kalihi and Mapunapuna areas."

Hughes Corp. argues in its suit that wind speeds near Waiea were below tropical storm force.

"Darby did not have sustained winds of 39 miles per hour in the area of the loss on Sunday, July 24, 2016," the suit said.

The lawsuit also contends that the insurers didn't state in the policy that water damage resulting from a named windstorm is excluded from the water damage portion of the policy.

"Defendants could have exempted the peril of named windstorm from the definition of water damage but failed to do so," the complaint said. "Accordingly, the subject loss was caused by water damage, and the water damage deductible should be applied."

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