Posted on: Wednesday, April 23, 2003
Firms may seek mold suit settlement
By Andrew Gomes
Advertiser Staff Writer
Experts in construction litigation say the lawsuit filed Monday by Hilton Hotels Corp. over alleged defects in the $95 million Kalia Tower will almost certainly be settled before trial.
Yet that was little comfort to 18 companies and individuals named as defendants in the case they characterized as a shotgun approach to go after as many pockets — big and small — as possible.
"It'll be expensive, and it'll cost everyone," said Alan Kugle, chairman of BEI LLC, a company that as Brewer Environmental Industries LLC supplied a coating material for the Kalia project.
Kugle and principals at other firms named in the suit said they could not respond to allegations because they had not yet been served with the suit filed in Circuit Court by Honolulu law firm Starn O'Toole Marcus & Fisher.
Some said they were surprised by Hilton's action and had no idea they would be blamed for mold or other alleged design and construction defects in the 25-story tower, which opened in May 2001 and had all 453 guest rooms closed in July 2002 because of rampant mold growth.
Others said they expected Hilton would sue after the 1,500-plus-attorney law firm Latham & Watkins last year instructed them to preserve documents related to Kalia work and inform their insurance carriers of possible claims.
As of yesterday, one defendant had already hired engineering expert Fred Kohloss, a retired mechanical and electrical engineer now in private consulting practice in Honolulu.
Kohloss, who agreed to talk about construction litigation in general and not the Kalia Tower case, said it's difficult to construct any building without mistakes, but those that wind up in litigation tend to have almost anyone associated with pieces of a project named as defendants.
A local construction attorney said shared contracts between designers, materials suppliers, contractors, subcontractors and inspectors make responsibility something easily disputed and difficult to sort out.
But the links between construction trades also creates a bigger pool of insurance resources to try to tap for a settlement, which could very well be less than the cost of litigation, experts said.
Hilton has not specified the amount of damages it is seeking, but expects the mold investigation and repair to cost $55 million. The company also alleges that it lost business because of the problem, and has made nonmold-related claims about what it said are defects affecting the value, operation and integrity of the tower at Hilton Hawaiian Village in Waikiki.
Specifically, Hilton said in its suit that there were defects in the building's exterior finish, air intake and exhaust systems, door framing, fireproofing, linen chutes, drywall joints, insulation, lanai doors — even the orientation of the building toward prevailing winds.
The suit named about 35 alleged problems in all. Experts said plaintiffs and defendants take a big risk asking a jury to decide a case sure to involve complex construction design and dueling expert witnesses.
Kohloss said very few big, complicated construction litigation cases go to trial, while others said around 95 percent of such cases are settled before judge and jury hear arguments.
Several representatives of the contractors, engineers and consultants being sued by Hilton were reluctant to discuss the Kalia case on the record for fear it could compromise their defense or bring further attention to their business reputation hurt by Hilton's allegations.
One said yesterday that his insurance company told him not to hire a lawyer, but to sit tight. Another went home early to avoid media calls.
Several could not be reached or did not return calls. But one said the cost of hiring an attorney for preliminary work could easily exceed his insurance deductible, making him think that settling may be right financially but wrong in principle.
"We don't have great financial resources. We're just trying to get by," he said. "Who knows what could happen because of this? It could bring us under if we are blamed for everything."
Kohloss said coverage for professional liability insurance, sometimes also known as errors and omissions coverage, can range from $250,000 for a one-person firm to $5 million or more for large firms.
Several defendants in the Kalia case have fewer than 10 employees, though there are others with billion-dollar parent companies and international offices.
