$20M project stalled by insurer’s refusal to pay after fire: Confidential settlement

Action: Bad faith refusal to pay insurance

Injuries alleged: Destruction of $20 million project for the failure to pay insurance proceeds needed to allow the project to proceed

Case name: Withheld

Court/case no.: U.S. District Court, Charleston Division

Mediator: Tom Wills

Amount: Withheld

Date: May 16, 2023

Attorney: Jamie A. Khan of McCullough Khan Appel, Charleston (for the plaintiff)

Metanoia, a nonprofit organization incorporated for the purpose of building leaders, establishing quality housing and generating economic development in North Charleston, was about to start on a $20 million-plus project transforming the Old Chicora Elementary School into a community asset in partnership with the city of North Charleston.

The plan was to turn the former school into a multiuse facility encompassing a performance arts center, an early childhood education center, affordable artists studios and an educational space for the community.

A large fire broke out in the school in February 2019 just before the redevelopment project began, destroying the historic theater and damaging a large part of the school.

Metanoia had builder’s risk insurance coverage on the building before the fire with a limit of $21.4 million in coverage. The builder’s risk insurer refused to fully cover the loss despite adequate coverage being in place for the loss.

The project, which was to cost more than $20 million, fell apart and sat idle for years because the insurer would not pay the claim and a large financial gap was created by the failure of the carrier to pay for the damage and destruction to the school.

Metanoia and the city of North Charleston sued in federal court in 2020, alleging breach of contract and bad faith refusal to pay benefits under the policy. There were multiple legal and factual issues in the case, including the issue of insurable interest as it related to Metanoia and the city.

After years of litigation, many depositions, expert witnesses, strategic motions practice and three mediations, plaintiff’s counsel was able to successfully negotiate a significant confidential settlement for Metanoia in 2023 so the large-scale project could once again move forward for the benefit of the community.