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Lawsuits over school construction seek nearly $2 million from Broward taxpayers
Two insurance companies have sued the Broward School Board for damages caused by construction blunders, saying they lost money when they replaced contractors who failed to finish projects.
Damages sought from taxpayers: Nearly $2 million.
The Great American Insurance Co. on Oct. 14 filed a federal lawsuit seeking $1.6 million after several years of problems at Royal Palm Elementary School in Lauderhill. Great American alleges the School Board didn't notify the insurer soon enough when construction delays began to mount. Earlier notification would have allowed the insurer to pressure the builder, or hire a replacement, to finish within contract deadlines, the lawsuit said.
About a month earlier, on Sept. 4, the Liberty Mutual Insurance Co. filed a lawsuit in federal court alleging the board owes it $288,536 for problems related to the replacement of air-conditioning systems at Silver Lakes Middle School in North Lauderdale and Attucks Middle School in Hollywood.
The lawsuits come as the school district's construction program is under intense scrutiny. On Sept. 23, FBI agents arrested now-suspended School Board member Beverly Gallagher and accused her of steering construction work to undercover agents posing as contractors. District auditors also have pointed out issues of overspending and mismanagement in recent audits of Hurricane Wilma repairs and the building of a new bus depot in Pembroke Pines.
Both civil suits were filed by the same attorney, Edward Etcheverry, who declined to comment. School Board attorney Edward Marko also declined to discuss specifics, saying the board had not received the complaints.
The lawsuits concern construction performance bonds that are supposed to protect taxpayers. The state requires school construction projects to be covered by bonds in case a contractor can't finish a job.
In these two lawsuits, the insurance companies argue that they should be reimbursed for completing the construction projects because the School Board breached their bond contracts. If the insurance companies win the suits, the bonds become null and void and taxpayers could get stuck with the bills, said Tom Lynch, a former Palm Beach County School Board chairman and president of Plastridge Insurance in Delray Beach.
"These bonds give school boards protection," Lynch said. "You have a responsibility to use these bonds because you are using taxpayers' money."
Insurers typically take a close look at contractors before agreeing to cover their projects, looking at previous complaints, lawsuits and companies' financial records. They are more likely to deny coverage up front than to sue after granting coverage, which is what makes the current lawsuits unusual, Lynch said.
"It is not a frequent event, to say the least," Marko said.
The Great American lawsuit alleges that under a contract signed in 2002, General Contractors and Construction Management agreed to renovate Royal Palm Elementary over a period of roughly a year and two months. But the suit says the School Board let the contractor "flounder" and finish the first phase more than a year late without writing the insurer so it could demand the contractor fix the problem.
When the second phase also ran into problems, the board waited until summer 2008 to demand that the insurer get another contractor to step in to finish it, the lawsuit alleges.
The complaint says the School Board allowed substantial delays, failed to declare the contractor in default and didn't inform the insurer in writing of the problems with the contractor in a timely manner.
Gene Farmer, director of Florida International University's construction management program, said that by filing its suit, Great American "is saying: You should have warned us that this was happening a long time ago and it wouldn't have gotten this bad. The earlier you see a problem coming, the more you can protect yourself against the losses that are coming."
Liberty Insurance also alleges that it had to hire another contractor to step in when Aventura Engineering and Construction Corp. didn't finish its projects. The Liberty suit alleges the School Board breached its contract when it refused to pay the insurance company for replacing the contractor, but offers few additional details.
Staff Writer Jon Burstein contributed to this report.
Jennifer Gollan can be reached at firstname.lastname@example.org or 954-572-2083.