INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Apartment complex fire included remediation expenses
A fire took place at an apartment complex that belonged to Maxus Metropolitan, LLC (Maxus). At the time of loss, a commercial property policy from Travelers Property Casualty Company (Travelers) was in force. That policy also provided a $5 million limit of income loss protection.
The apartment complex consisted of six separate phases. Maxus and Travelers had no issue with the building (Phase 6) that suffered direct fire damage. After trading information regarding fire damage and needed repairs, Travelers ended up paying approximately $3.5 million to Maxus. However, a dispute arose over costs of remediation that, primarily, affected the other phases. Maxus stated it would have to undertake significant expense to make the complex’s other buildings habitable.
The two parties’ opinions were in stark contrast. While Maxus’s coverage expectations included a claim for substantial soot and water damage, Travelers withheld payments while it attempted to determine the scope of Maxus’s claim for remediation.
Maxus based its loss request on reports from experts it hired to inspect their complex. The company eventually filed suit alleging vexatious payment delay and bad faith on the part of its insurer. Vexatious refers to a decision, in this case refusing payment, that has no justifiable basis. A trial court ruled in favor of Maxus. That decision included damages of roughly $27.3 million and an additional amount of slightly more than $540,000 (for vexatious refusal to pay) plus attorneys’ fees and pre-judgment interest. The insurer appealed. Upon appeal, the 15-month long series of actions of both Maxus and Travelers were re-examined by the higher court.
As was mentioned earlier, the issue of remediation came down to opposing opinions presented by Maxus and Travelers. The fire at the Phase 6 property produced embers that spread among the entire apartment complex with instances of burning holes in the roofs of the other buildings. Maxus decided to enlist expert opinion after their vice president of construction noticed problems during an on-site visit. They secured the services of Forensic Building Science (FBS). Its assigned task was to inspect the properties of Phases 1 though 5.
FBS collected and submitted 72 samples that were submitted to a lab. FBS recommended and later performed an additional inspection. Its official report indicated that the properties of Phases 1 though 5 were affected by soot as well as water damage to varying degrees. The infiltration was due to leaks created by fire embers and from entry via the buildings’ HVAC systems. FBS recommended tenant and employee evacuation in order to remediate their identified levels of damage.
The report was immediately shared with Travelers. After a couple of weeks and after Maxus’s second request for a response, Travelers advised that they arranged for an investigation by an industrial hygienist. The insurer also advised that, until the hygienist completed work, it would take no action, particularly with regard to paying for any evacuation expenses.
After performing two separate inspections, the hygienist reported that it did not find evidence of infiltration to support Maxus’s claims for remediation and related costs. In the meantime, Maxus had already begun both evacuations and remediation. Travelers confirmed that its expert found nothing to support the occurrence of covered physical damage from soot that required remediation. Their decision also extended to the claim of water damage. In its opinion, any such damage was unrelated to the fire and did not take place within the policy period.
The higher court examined all of the lower court decisions disputed by Travelers, including the following:
- Coverage for soot damage
- Coverage for water damage
- Vexatious refusal to pay
- Fairness and adequacy of jury instructions
- Calculation of reasonable attorneys’ fees
- Calculation of pre-judgment interest
After consideration of applicable state law as well as consultation of relevant cases, the higher court found fault only with the dates the lower court used in calculation of pre-judgment interest. That matter was invalidated and remanded for recalculation. All other matters were affirmed in favor of Maxus.
Maxus Metropolitan, LLC v. Travelers Property Casualty Co. of America—U.S. Court of Appeals for the 8th Circuit—No. 24-1176—August 28, 2025.
