After a Lighthouse Project Burns in Confirmed Arson Case, Developer Sues Multiple Insurers for Coverage

After a lighthouse renovation project burns, its developer looks to its insurers for help, only to be met with denials and disputes.
By: | September 16, 2020

A four-decade-old landmark, the Dewey Beach lighthouse overlooking Delaware’s Rehoboth Bay was ready for an upgrade. The Lighthouse Cove development would be a large, 80,000 square-foot project that would not only include renovations to the lighthouse and its attached restaurant, but would also see the demolition of a performing arts center and the construction of the Lighthouse Cove Event Center in its place.

Additional buildings included a hotel and condos.

Developer Harvey Hanna and Associates made its plans for renovations known in 2007. News of the upgrade, however, sparked unease in local businesses and residents, who filed suit against the developer shortly after. An agreement was reached in 2011, and the development plans moved forward.

But, just as renovations reached completion in April 2020, the lighthouse and restaurant were irreparably damaged in a fire. After review from state fire investigators, the source of the fire was determined to be arson. No perpetrator has yet been found.

Thomas Hanna, president of the development firm, reviewed coverages for the lighthouse. According to his records, multiple insurance policies were current through April of this year. They even had one insurer, Wilmington Insurance Company, agree to coverage a day before the fire took place.

He should have full coverage for the incident.

However, during the early days of the ongoing investigation, the insurers tried to back out of the policies, refusing payment. Hanna filed suit.

In his complaint, Hanna named several insurance companies as defendants, including Drass Insurance Agency.

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Drass had worked with several insurance firms in underwriting the lighthouse’s risks, including Catalytic Risk Managers, Lloyd’s of London, GuideOne National Insurance Company and Safety Specialty Insurance Company on the lighthouse.

Wilmington Insurance Company was also named as an affiliate of Drass.

Markel American Insurance Company of West Virginia was a final insurer named in the suit. This insurer, the lawsuit claimed, should have been on the hook for damages to the project’s decks, piers and pilings through April 2020, based on policy dates.

The complaint did not list the amount the developer believed it was owed, however it did state that potential damages under the Wilmington Insurance policy totaled $900,000. Markel’s policy, likewise, was listed at a $1.6 million in potential coverage.

According to the investigators, physical damage could reach as high as $750,000.

Scorecard: An ongoing investigation will continue while Hanna and the insurers move their dispute to court.

Takeaway: Construction projects that draw the ire the local community do not always fall victim to vandalism, but it is wise to invest in safety measures like video monitoring to deter such crimes, or at least expedite investigations. Determining the cause of damages faster can help to resolve coverage disputes. &

Autumn Heisler is the content strategist at Risk & Insurance®. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]