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Nationwide Insurance go to federal court to recover $16.2M in damages paid to Virginia Beach hotels for hurricane damage in '98
Columbus, OH -- An independent Isle of Wight insurance claims adjuster, hired to represent Nationwide Insurance, appraised hurricane damage to Virginia Beach hotels like Santa Claus when he should have been more like Scrooge, the company claims in a lawsuit.
Larry Wood's generous settlement terms for hotels owned or operated by ex-convict Ed Ruffin and Bruce Thompson's Professional Hospitality Resources (PHR) improperly cost the insurance company $16.2 million. Ruffin and Thompson are not defendants in the suit which began Monday in U.S. District Court for the Southern District of Ohio.
Instead the Columbus-based insurance company has filed suit against Wood, and adjusting companies, National Catastrophe Adjusters (NCA) of Indianapolis and McLarens Toplis of Chicago to recover what it contends is the multi million dollar overpayment.
Wood is scheduled to be called to the witness stand today by Nationwide as a hostile witness which will subject him to cross examination techniques by the company's lawyers.
Nationwide hired the two adjusting companies to help appraise damage caused by Hurricane Bonnie on Aug. 28, 1998. The two companies then hired Wood to review the storm damage at six (6) Virginia Beach hotels owned or operated by Ruffin and Thompson's Professional Hospitality Resources (PHR).
The suit, filed in October 1999, contends that Wood approved payment of $21.5M to PHR for damage to 577 rooms, hallways and lobbies at the Best Western Beach quarters, Clarion Inn, Comfort Inn, Dolphin Inn, Ramada Inn, and Tradewinds hotels.
The majority of the damage was caused by wind-blown rain seeping through window insulation and air-conditioning vents and under exterior doors. Such damage was not covered in PHR's policy, Nationwide contends. And instead of $21.5M, Wood should have approved payment of only $5.3M, the company claims.
But despite the wind-blown damage exclusion, Wood approved replacing carpeting, drapes, beds, televisions, lamps, wall coverings, kitchen appliances and a host of other items.
In a pretrial motion, one of Nationwide's lawyers said, "It became apparent that Mr. Wood had given away the store." It was also revealed in pretrial depositions that PHR had hired its own appraiser, John Henkel, and Wood testified that he, Henkel, and Thompson "were business friends."
Several of the hotels needed extensive repairs and renovation long before the storm, the suit alleges. For example, PHR bought the Tradwinds a year before the hurricane and had planned to gut the hotel as part of a multimillion-dollar renovation, and the roof to another hotel was severely deteriorated long before 1998.
In pretrial documents, Nationwide alleges Wood wasn't qualified for the job NCA and McLarens hired him to do because his appraisal experience had been limited to railroads and heavy machinery.
By the time Nationwide executives discovered the alleged errors, Wood had already signed documents on behalf of the company to pay the $21.5M. Nationwide claims he exceeded his authority.
Ray Milligan, a staff appraiser for Nationwide, testified that he felt he had to honor Woods' approvals.
Nationwide's attorneys argued that NCA and McLarens and Wood should be held liable for the $16.2M overpayment because the two (2) companies hired 'an incompetent adjuster and failed to properly supervise his work."
Richard O. Wuerth, representing McLarens and Wood, argued that damage appraisal is discretionary and Milligan and Nationwide executives approved Wood's assessments.
In addition to the $16.2M in compensatory damages, Nationwide is also seeking unspecified punitive damages and legal expenses.
The trial is expected to continue another three (3) weeks.