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Medical Tower Rainwater Damages Analysis

The following is an excerpt from an Interface Consulting work product issued for use in litigation, arbitration, or mediation (dispute resolution). Names, dates, and other information has been modified for client confidentiality purposes.


Mammoth Insurance v. Hillman Co. Litigation

I. Introduction

On or about October 23, 2007, Hillman Company contracted with Jacinto Hospital System (Jacinto) to construct the interior build-out of some of the floors of the Eastwood Medical Center Tower located at 1500 Main Street in Blossom, Alabama (the Tower). The architect of record for the interior build-out of certain floors of the Tower was Eagle Engineering. According to JP Sanders, Onsite Project Manager for Hillman Company and/or its parent company (collectively referred to as Hillman), Hillman’s work was started in September 2007.

In connection with the Tower, Hillman acquired from Mammoth Insurance (Mammoth) an installation floater insurance policy, Policy No. IMP-5924313-00-03 (the Insurance Policy). The Insurance Policy specified a policy period from August 13, 2007, to February 13, 2009, and covered Tower Levels 1 through 7.

A key provision of the Insurance Policy is Paragraph B.2.f. This provision excludes coverage for losses caused by rain, sleet, snow, hail, ice, or dust to property not in a fully enclosed building.

It is Interface Consulting’s understanding that the Tower suffered damages as a result of rainwater entering the unfinished Tower due to Hurricane Sam passing over Blossom on....

I.A. Interface Consulting’s Statement of Opinion dated October 29, 2009

In Interface Consulting’s Statement of Opinion dated October 29, 2009, we concluded that, among other conclusions, Hillman chose to commence interior build-out work, particularly insulation, drywall, flooring, wiring, piping, and millwork, before the building was fully enclosed. In doing so, Hillman assumed the risk of damage due to water intrusion prior to the building being in a fully enclosed condition. Additionally, Interface Consulting concluded that....

In describing a fully enclosed building, Interface Consulting stated that in the construction industry, the term“fully enclosed building” describes a building whose permanent exterior envelope has been controlled, closed in, or otherwise sealed; and the terms “fully enclosed,” “dried-in,” and“controlled” are synonymous and can be used interchangeably. As such, the damages suffered by Hillman as a result of rainwater entering the unfinished Tower due to Hurricane Sam passing over Blossom on September 13, 2008, should be excluded from coverage. Interface Consulting continues to support our opinions previously stated on….

Should it be determined that damages suffered by Hillman are covered by the Insurance Policy, Interface Consulting has been asked to comment on the damages and determine if the damages claimed by Hillman are reasonable and are direct physical damages that resulted from rainwater entering the unfinished Tower due to Hurricane Sam passing over Blossom on September 13, 2008.

I.B. Preparation of Interface Consulting’s Statement of Opinion on Damages

In Interface Consulting’s discussion regarding our opinions in this matter, we are not offering any legal opinions relative to the contents of the contract or Insurance Policy in effect in this matter. We are describing construction terminology and conditions relevant to a participant in the construction industry. Further, I am evaluating the claimed damages based on my 30 plus years in the construction industry as an engineer, contractor, and owner’s representative. My work history has required me to understand construction means and methods and all aspects of causes and effects of damage to work items and whether or not a particular work item could have been physically damaged as a direct effect of a rainfall event such as described above. For a summary of my experience, my resume is provided within Tab 2.

I.C. Hillman’s Sworn Statement in Proof of Loss Filed

On February 2, 2009, Jackson and Associates, LP, on behalf of Hillman, presented Mammoth’s Claim Division with a Sworn Statement in Proof of Loss regarding a loss Hillman allegedly sustained by Hurricane Sam in the amount of....

 

II. Scope of Hillman's Reconstruction Work

On or about December 10, 2008, Eagle issued its Deconstruction Documents that described what deconstruction was done as well as what reconstruction work should be performed. Those drawings were accompanied by....

 

III. Methodology

In evaluating the costs that were presented by Hillman for its claimed damages, it provided certain back-up for some of the work items and little to no back-up for other work items. Interface Consulting has attempted to utilize back-up that was provided when possible and used our experience in the construction industry on other aspects of certain costs. Where there was no back-up or detailed breakdown of cost, we designated that cost as “not applicable,” or in other words, unsupported.

Additionally, Interface Consulting has relied upon and made our own conclusions based on interviewing various experts in the construction field to determine the reasonableness or lack of reasonableness for the removal and replacement of certain items of work. Those interviews include….

 

IV. Summary of Opinions

…The following is a summary of Interface Consulting’s opinions concerning this matter:

  • In the event that Hillman can collect benefits from Mammoth’s Insurance Policy for damages it suffered as a result of Hurricane Sam, it can only collect benefits for property that was directly physically damaged and not otherwise excluded by the Insurance Policy.

  • Should it be determined that Hillman is due payment for the damage caused by rainwater from Hurricane Sam, that value is within the range of....

...

 

V. Discussion of Opinions

A building whose permanent exterior envelope has been controlled, closed in, or otherwise sealed can be described by the terms “fully enclosed,” “dried-in,” and“controlled,” as each of these terms are synonymous and can be used interchangeably. Regardless of whether the Tower was fully enclosed, the damages suffered by Hillman resulted from rainwater entering the unfinished Tower when Hurricane Sam passed over Blossom on….

V.A. Direct Physical Damage

V.B. No Direct Physical Damage

V.B.1. Issues with Warranties and Life Safety Hazards

V.B.2. Possible Contaminants

V.B.3. Unnecessary Demolition

V.B.4. Lack of Justification, Back-up, and Price Support for the Work

...
 

VI. Damages

VI.A. Millwork

Regarding the removal and replacement of millwork, Landscome Services, LLC (hereafter Landscome), the millwork subcontractor, provided a list of the millwork it inspected within the Tower. Within that inspection document, it categorized the description of damage into three (3) broad categories. The categories included “S” to indicate that structural integrity of the product was compromised, “C” to indicate evidence of mold and mildew contamination and required replacement, and“Q” to indicate quality control issues such as misalignments and irregular width of butt joints due to expansion and contraction of the materials caused by variations in temperature and relative humidity.

For the millwork it categorized as....

...

In conclusion, millwork was classified as follows:

  • Millwork with direct physical damage from water
  • Millwork with no direct physical damage from water
  • Millwork removed and replaced because of mold and/or mildew
  • Millwork that was unnecessarily demolished and replaced
  • Millwork with no justification, back-up, or price support

A summary of the cost for the millwork is listed in the following table:

 

VI.B. Millwork Associated Work

...

VI.C. Countertop Surfaces

...

VI.D. Automatic Door Operators and NICU Sliding Doors

...

VI.E. Glass and Glazing

...

VI.F. Drywall

...

VI.G. Ceramic Tile and Terrazzo

...

VI.H. Acoustical Ceiling

...

VI.I. Flooring (VCT & Sheet vinyl)

...

VI.J. Painting

...

VI.K. Wall Protection and Cubicle Curtain Track

...

VI.L. Security Management

...

VI.M. Elevator Rental and Maintenance

...

VI.N. Pneumatic Tube System

...

VI.O. Fire Protection and Sprinkler System

...

VI.P. Plumbing

...

VI.Q. HVAC

...

VI.R. Testing and Balancing

...

VI.S. Electrical

...

VI.T. Low Voltage –Voice/Data, Paging, Nurse Call & MATV/CATV

...

VI.U. Hillman General Conditions and Fee

...

VI.V. Other Cost Items Not Included in Report

...

VI.V.1. Comprehensive System Evaluation

...

VI.V.2. Initial Recovery Cost

...

 

VII. Summary of Costs

 

VIII. Signature