Insurance Case Could Leave Waukesha Condo Owners With Demolition Bill

WAUKESHA, WI — The costs to demolish a condemned Waukesha condo building may largely fall on its former residents after a federal judge on Wednesday sided with the building's insurance company in a legal battle.

Authorites evacuated the residents of Horizon West Condominiums at 315 N. West Avenue in December of 2021 as their 48-unit building was deemed structurally unstable, and by January, the city ordered that the 1966-built building be razed. Now, after a legal battle with the building's insurance company, the residents are finding through a court order that the policy wasn't required to cover the costs of government-ordered demolition or the rust that possibly led to the building's instability.

The building's homeowner association and several of its residents filed a lawsuit against Travelers Indemnity Company of Connecticut, on May 19 in the U.S. District Court for the Eastern District of Wisconsin seeking coverage. Judge Lynn Adelman dismissed the lawsuit on Wednesday, citing several exclusions in the insurance policy and court precedents.

Among those exclusions is that what caused the damage to the building did not begin during the insurance policy period, Adelman wrote. Court documents filed by plaintiffs note that water may have seeped in and corroded structural steel.

"Although the building was physically unstable during the policy period, the complaint alleges that members of the homeowners’ association noticed 'instability' in the building’s balconies 'prior to June 5, 2020,'" Adelman wrote, "Thus, the complaint makes clear that the building was unstable before the policy became effective on May 11, 2021."

Adelman also sided with Travelers' argument that the residents were not covered by the insurance policy, just the homeowners association was. After the first order to raze the building came, the condo owners sought additional time to explore options.

Soon after the evacuation, the city released complaints about the balconies received in the past. A complaint in June 2020 led to an order for the balconies to not be used, and by September of 2021, the city had ordered fencing around the building because of debris and worsening balconies, according to a Patch report. Balconies were removed from the building in October of 2021, revealing potential issues with the structure and several columns.

SEE ALSO: Displaced Waukesha Condo Residents To Appeal Demolition Order

Attorney Mike Ganzer, who represented the condo association and owners, told Patch the homeowners plan on appealing Wednesday's judgment.

"We are disappointed in the decision and intend to continue moving forward. The Horizon West homeowners lost all of the equity in their condos and still owe on the notes and mortgages for the property," Ganzer said. "Many have asked whether bankruptcy is an option. We will not give up. Justice must be served."

The demolition of the building is anticipated to cost around $1-2 million for its former residents, according to a statement from Laurel Peterson, one of around 70 displaced residents. The condominiums are owned by their former inhabitants and not a third-party company.

"It's devastating to us as condo owners that not only have we lost our homes, but the entire financial and logistical burden of this building's demise has landed on us," said Peterson. "This is exactly the type of situation that homeowners think they have insurance for to protect them - only to be left high and dry through no fault of our own."

Peterson said numerous owners are possibly facing bankruptcy in the future.

"I don't know where the city thinks any of us can come up with the funds - in cash - to pay for the demolition of this property when we have lost all or almost all of our financial assets due to this situation," Peterson said.

A GoFundMe set up by Diana McGeen has sought to raise money for the displaced condo owners.

The listed attorney for Travelers did not immediately respond to Patch's request for comment. Patch also reached out to media contacts at Travelers for comment and will update if we hear back.

Read the full court judgment in the case below:

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