Reference no: EM133676940

The owner of this multi-tenant retail facility is a 65-year-old retired construction engineer professor. They have invested their life savings into the building and acts as their own property manager. The facility received significant cosmetic and structural damage during an earthquake. All the tenants were evacuated until repairs could be completed. The owner immediately employed an architect, a structural engineer, and a general contractor to implement repairs. The owner felt in this manner they were acting in the best interest of themself and the tenants. By expediting repairs, they would get the tenants back into the facility, thereby minimizing loss of sales. They felt they were also looking out for the insurance company. The design teams' corrections were well-documented, and the contractor's costs were tracked on a time and material basis. The insurance company also immediately mobilized but did not take any action. They preferred to sit back and watch the corrective work take place. Upon completion of this $10 million repair project, the insurance company then questioned whether the fixes were proper and whether the actual costs reported were accurate. They also referred to a provision in the property insurance policy, which required the owner to obtain competitive bids on all portions of repair. The insurance company ultimately offered the owner 80 cents on the dollar for repairs, which the owner passed through and offered to both his design and construction teams.

1. Will they accept?

2. Who loses in this situation?

3. What should the different team members have done to have assured 100% collection on the repairs?

4. Is this a standard situation in the insurance claim arena?

5. If the owner sues the insurance company, will he collect 100% of costs incurred by himself and his agents?

6. Will the tenants pitch in?

7. What legal recourse does the owner, tenant and contractors/subcontractors have if any?