Construction defects affect a New York landmark
Errors made by an architect and contractor could have resulted in catastrophic losses and claims.
According to the International Risk Management Institute (IRMI), a construction defect is defined as “a deficiency in the design or construction of a building or structure resulting from a failure to design or construct in a reasonably workmanlike manner, and/or in accordance with a buyer’s reasonable expectation.” IRMI goes on to differentiate between dangerous defects threatening life and limb, and passive defects threatening neither but that can result in lost value or increased cost from correcting the defect.
Unusual construction issues
Citibank Center, which is presently named 601 Lexington, quickly became a New York City landmark when it was built in 1977. The building was noteworthy both because of its 45 degree-angled top and the fact it stood on stilts that contained its bottom nine stories.
Why stilts? In 1905, St. Peter’s Evangelical Lutheran Church moved to the proposed building site of Citibank Center. While church leaders agreed to the church’s demolition, they required a new church be built in its place. Furthermore, they required the church be freestanding. By building on stilts, Citibank Center could be placed above the church.
To accommodate the church structure, the stilts had to be located at the midpoint of each side of the building rather than at its corners. This caused the building to be less stable than it would have otherwise been. To account for this decreased stability, a chevron bracing structure was used. This, in turn, caused the building to be unusually light. As a result, it would sway in the wind. To quiet the building down so occupants would not feel like they were at sea, a 400-ton tuned mass damper was placed at the top of the building.
In 1978, a Princeton University civil engineering student contacted the building’s structural engineer to report her findings that the building could be toppled by wind damage. While the structural engineer had accounted for damage from perpendicular winds, he had not accounted for quartering winds that were far more damaging given the building’s unusual design. What’s more, the tuned mass damper ran on electricity. In the event of a blackout caused by a damaging storm, the damper could be lost when it was needed most.
There was more bad news on Lexington Avenue. The construction company had received approval to switch from welded joints to bolted joints, to save labor and material costs, without the structural engineer’s knowledge. In addition, the construction company used New York City’s truss safety factor of 1:1 instead of the column safety factor of 1:2. Both actions increased the building’s vulnerability to high winds.
Fearing property damage, reputation damage and economic losses, a plan to weld two-inch steel plates over the building’s 200 joints was hatched in secret. Six weeks into the work, which was performed after the conclusion of the workday, only half of the job was completed as Hurricane Ella formed off Cape Hatteras and pointed at New York City. While emergency evacuation plans were filed with New York City, again without the public’s knowledge, the storm eventually headed out to sea.
There is an awful lot to unpack in this unsettling tale.
Mitigating deficient design
To begin, both the design and construction of Citibank Center were deficient. Not only had the structural engineer failed to account for potentially destructive quartering winds, the construction company had knowingly compromised the integrity of the building’s structure to reduce labor and materials costs.
After receiving the Princeton University civil engineering student’s troubling findings, the structural engineer had determined the building could be toppled by a storm calculated to occur in New York City once every 16 years if the tuned mass damper lost power. Following this catastrophic event, claims would have been filed for defects caused by both design and construction.
One wonders if any of the companies or individuals involved in the construction of the building and in making decisions following discovery of the defects had thought to transfer the risk of reputation damage to an insurance product. Even if they had, it may not have been available at the time.
Had Citibank Center been felled by damaging winds, there is no question virtually every other imaginable risk would have been realized. The claims process would have been wide and deep. Families of individuals who died as a result of the disaster would have submitted life insurance claims. Those who were injured would have filed for workers’ compensation benefits. Businesses forced to close would have filed for business interruption coverage. Companies that lost key personnel would have filed key person insurance. Claims would have been filed against property insurance and liability insurance. Individuals who were injured or became ill, and who were covered by health insurance, would have filed these claims.
It is said success has many fathers, while failure is always an orphan. When it comes to insurance claims, though, failure is never an orphan. We just get busy trying to make insureds whole again.
Actions taken by the many individuals and companies who designed and built Citibank Center could have caused claims to explode. This helps to demonstrate why both carriers and brokers need to conduct vigorous due diligence before transferring a client’s risk to an insurance policy. To whatever extent possible, when decisions with the potential to affect us are made, we deserve a seat at the table.
Jenean Meier (jmeier@kmrdpartners.com) is a claims advocate at KMRD Partners, Inc., a nationally recognized risk and human capital management consulting and insurance brokerage firm located in the Philadelphia region, serving clients worldwide.
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