Travelers Faces $28.7M Breech Of Contract Suit

Travelers Insurance, the subsidiary of St. Paul, Minn.-based insurer St. Paul Travelers, has been hit with a $28.7 million lawsuit for breech of contract over its refusal to pay for repairs to St. Charles General Hospital in New Orleans in the aftermath of Hurricane Katrina.

In a lawsuit filed May 23 in U.S. District Court in New Orleans, the hospital charged that Travelers failed to provide payments to Building Concepts & Designs Construction Inc. (BCDC) to make the required repairs.

BCDC, based in Florida, was contracted by the hospital to repair the building and handle the insurance contacts.

The lawsuit claims that Travelers owes about $6.5 million to repair the building, $14.6 million in damages and $8.4 million in attorneys' fees, due to its breach of contract, which includes loss of income.

Identified as defendants in the lawsuit were Travelers; Rick Sparks, a company representative; Norman Taylor, an adjuster for Travelers; William Schoenborn, a company vice president; and William Schaefer, a vice president in charge of major claims.

According to court filings, BCDC prepared a preliminary invoice to begin work at close to $2 million, which it submitted on Nov. 15 to Mr. Sparks after many attempts to contact the company. Travelers sent two checks totaling $700,000 as an advance to begin repairs pending detailed documentation and proof of loss.

On Feb. 10, a more detailed invoice was submitted to the insurer for less than $6.5 million. BCDC said it made more attempts to contact Travelers for several weeks, to no avail.

Finally, Travelers sent Mr. Taylor to the site, but he was accused of being "aggressive, abusive and shockingly unprofessional..." Mr. Taylor is alleged to have been uncooperative with Stephen D. Vaughan, president and chief executive officer of BCDC, for weeks.

Mr. Vaughan eventually requested another adjuster be sent.

After many weeks of making the request, Mr. Vaughan reached Mr. Schoenborn, who, the suit said, accused Mr. Vaughan of being an out-of-state contractor looking to take advantage of the situation. Mr. Schoenborn is alleged to have said that a "reduced settlement offer" would be made by the company at its leisure.

Mr. Vaughan later contacted Mr. Schaefer, who showed the BCDC chief executive "hostility and apathy," according to the complaint.

The suit alleged, "[Mr.] Schaefer's interaction with [Mr.] Vaughan made clear that Travelers--even their executive staff--were disinterested, rude and steadfast in their refusal to provide reasonable customer support and assistance."

Jennifer Wislocki, a spokeswoman for the company, said, "While I can't discuss the details of this situation due to pending litigation, I can tell you that we are committed to meeting the needs of our policyholders and considering all claims with care to achieve a fair and equitable resolution."

The carrier, she said, has not yet seen the suit, but "St. Paul Travelers is proud of its response to such an unprecedented event as Hurricane Katrina, helping thousands of individuals and families rebuild their homes and businesses.

St. Charles' suit was filed by attorneys Jacques F. Bezou and Richard R. Ray.