Richmond spent $19M, sued insurers
for losses
By John Accola, Rocky Mountain News
June 12, 2004
Richmond American Homes, Colorado's largest home
builder, has spent nearly $19 million to repair Front Range homes plagued by
mold and water damage.
Richmond's "water intrusion and mold" bills for 2,648 single-family homes
over the past decade were disclosed in a federal lawsuit against four
liability insurers.
Richmond alleges the insurance companies refused to reimburse the home
builder after it submitted repair claims under several general liability
insurance policies.
The lawsuit, filed in Denver's U.S. District Court last December, accuses
the defendants of deceptive sales practices and "unreasonably" denying
coverage. Although the complaint doesn't state the amount of disputed
claims, Richmond has since become more forthcoming in a series of follow-up
documents.
In sworn statements, Jeffrey Rainey, head of Richmond's Colorado home
division, and a risk manager at parent company MDC Holdings Inc. acknowledge
multimillion-dollar losses related to the "investigation and remediation of
homes constructed by Richmond as a result of damage and, in some cases,
personal injuries, caused by excessive moisture, water intrusion and in some
-cases, mold."
In his affidavit, Rainey indicated that hundreds of mold-related repairs
involve ventilation problems in basements constructed with suspended floor
systems, a common practice in Colorado, where expansive soils can lead to
buckled and cracked foundations.
As of December 2003, Rainey said Richmond had incurred $18 million in
repair costs and expenses subject to "water intrusion" claims.
But in May, one of Richmond's insurers - Interstate Fire & Casualty Co. -
stated the home builder has calculated "at least $18,780,182.84 in losses
related to mold."
The homes, built between 1993 and 2002, "are located in a number of
different developments throughout the Front Range - in cities such as
Superior, Aurora, Highlands Ranch, Fort Collins, Colorado Springs and
Lakewood, to name a few," according to one court document.
Golden attorney Eric Torgersen, Richmond's outside counsel, declined to
elaborate on the repairs or the specifics of the case.
"Obviously, what is in the court record is what it is," Torgersen said.
Richmond is seeking triple damages - more than $50 million - under a
provision of Colorado's Consumer Protection Act for cases in which the
alleged misconduct is "willful or wanton."
The attorney for lead defendant National Union Fire Insurance Co. said he
had been instructed by his client not to discuss the case.
"Some cases permit discussions; other cases don't," said National's
Denver attorney, William Senter.
Scott Sullan, a lawyer who has represented thousands of Colorado
homeowners in defective construction suits against builders, expressed
surprise over Richmond's mounting repairs for mold and water seepage.
"I knew they were out there repairing homes . . . but that's
astronomical," Sullan said.
In some parts of the country, homeowners have won multimillion-dollar
settlements and court judgments against builders after claiming mold had
triggered debilitating allergies and other illnesses.
Sullan, however, said toxic mold caused by excessively damp indoor spaces
is generally not a problem in arid Colorado. What Richmond appears to be
addressing is mold rot and water damage to basement walls, exterior stucco
and ceilings, he said.
"Congratulations to Richmond on voluntarily fixing their homes," Sullan
said. "A lot of home builders haven't taken the approach that Richmond has
and have left the homeowners holding the bag."
On the other hand, Sullan said Richmond's attempt to recover three times
actual damages is over the top.
He noted that parent company MDC spearheaded the lobbying effort last
year that led to a $250,000 cap on triple-damage judgments against home
builders.
"Clearly they are going for the big bucks," Sullan said. "Isn't it
amazing that when I file one of those cases, I'm abusing the system, and
when they do it they are seeking justifiable damages."
Richmond's statement to its home buyers:
Richmond American Homes' focus has been and is directed toward proactively
addressing the concerns of its home buyers. Some of Richmond's insurance
carriers have reimbursed Richmond for a portion of the costs incurred in
these efforts, but Richmond's other insurance carriers have refused to honor
their policies. This lawsuit has been filed in order to confirm the
responsibility of Richmond's insurers for this claim.
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