MANY NORTHRIDGE SUITS STILL PENDINGPosted On: Feb. 21, 1999 12:00 AM CST
LOS ANGELES -- Litigation over the Northridge earthquake could be even more tumultuous than the quake itself.
While the lawsuit that got the most attention immediately after the January 1994 quake has been settled, one attorney expects many more suits to be filed once the extent of damage to building components has been revealed.
Litigation over the collapse of the Northridge Meadows apartment complex settled for an undisclosed sum in 1995, said Joel Castro, a partner with Castro & Worthge in Los Angeles. The firm represented the plaintiffs.
But many other, more complicated suits -- such as those alleging defective welds on steel frame buildings -- remain to be heard, said Mr. Castro, whose firm has filed about 15 product liability suits against weld metal manufacturers.
The Northridge quake challenged the assumption long held by engineering experts that welded steel moment frame connections were capable of extensive yielding without a loss of strength. This type of weld is the most common in high-rise buildings.
"The weld metal is supposed to flexible, but it's not. It `fractures brittlely,' though it's not supposed to fracture at all," Mr. Castro said, quoting from one of the lawsuits.
Unfortunately for building owners, there is a statute of limitations for such lawsuits, he pointed out.
"There's a real statute of limitations issue. Normally the statute of limitations for latent defects is 10 years, but there's a three-year statute of limitations for known property damage," he said.
Because the earthquake struck five years ago, time may be running out for property owners to seek any compensation from third parties to cover the cost of repairing these allegedly faulty welds.
"As soon as the fracture is found, the three-year clock starts ticking," Mr. Castro said.
Because the city did not require inspections until March 1995, the three-year-statute of limitations will commence from the date the owners received inspection reports from expert consultants, Mr. Castro suggested.
On March 1, 1995, the city of Los Angeles adopted an ordinance mandating the inspection and repair of all steel high-rise buildings with moment frame connections in designated earthquake-damaged areas.
Then, in 1996, the city banned further use of flux cored weld metal -- the kind used in moment frame welds -- because it could not meet required toughness standards under more rigorous building codes adopted after the quake. However, engineers remain uncertain as to whether even the new materials will be strong enough to withstand another earthquake like Northridge. It was unusual in that it created both horizontal and vertical ground movement, whereas earthquakes generally create movement in only one direction.
The Institute for Business & Home Safety in Boston is monitoring steel-frame structures and will publish by the end of this year a guide for earthquake property damage litigation, according to Paul Devlin, chief executive officer.
In contrast with the weld defect cases, the Northridge Meadows Apartments construction defect case was settled fairly easily, according to Mr. Castro.
"We got all of the insurance that was available" from the building owner and contractors involved in the construction of the complex, which was leveled by the quake, he said.
Mr. Castro said that as many as 90% of the other construction defect cases he handled involving homeowners were similarly settled, though a few did go to trial.
In such lawsuits, it is common to name as defendants all parties to a real estate transaction, including the real estate broker, seller, builder and designer. "We won a trial last year against a former owner and seller and contractor. The (real estate) broker was dismissed, and that's on appeal," he said.
He is preparing to go to trial in one case, Elmassian vs. Republic Insurance Co., where the insurer declined to fully compensate the homeowners because it said the damage to their home's foundation was pre-existing.
Indeed, many of insurers' initial damage estimates were far lower than the sums they eventually paid out in connection with Northridge, said Paul VanderMarck, vp at Menlo Park, Calif.-based Risk Management Solutions Inc. RMS is one of a handful of companies that uses computer modeling to project losses based on exposure information from insurers.
He likened the claims adjudication process in Northridge to that of the 1991 Oakland Hills fire, where politics had a hand in the amounts insurers eventually paid. The California Department of Insurance publicly called for insurers to pay claims stemming from the quake.
"The political environment may have played a role" in payments, because in many cases insurers paid out more than policy limits, he said.
"There were reports of homes that were total losses that were seriously underinsured," he said.
Since the Northridge quake, however, many insurers have re-examined the vulnerability of the exposures in their property portfolios, he said (see story, page 3).