Cape May Dismisses Convention Hall Suit

CAPE MAY – After almost five years and $448,000 in paid fees, Cape May dismissed its lawsuit against a group of construction, engineering, and architectural firms involved in building Convention Hall.
The suit, filed in 2016, four years after the building opened, accuses the firms of negligence by effectively building the structure or portions of it below FEMA guidelines for a building that close to the ocean.
At the Cape May City Council meeting May 5, a resolution was on the agenda, authorizing settlement and dismissal of the case. The resolution was adopted unanimously.
The suit was filed in the same year that former Mayor Edward Mahaney lost his bid for reelection to current Mayor Clarence “Chuck” Lear, who took office in January 2017.
How did the city end up spending nearly half a million dollars on a lawsuit it is now unanimously willing to walk away from?
The New Convention Hall
The building opened Memorial Day 2012. There was a rush to open the building at the symbolic beginning of summer. Since some work still needed completion, the structure opened without a permanent Certificate of Occupancy.
The 20,000 square foot structure, costing the city $10.5 million, also did not receive flood insurance shortly after opening. Although some forms of insurance were arranged through the Joint Insurance Fund Municipal Excess Liability program, adequate insurance coverage was an issue at the Nov. 20 City Council meeting.
The problem with that timing is that in October 2012, Hurricane Sandy struck the Jersey Shore. In advance, the city constructed a protective dune to shield the new building, and it rode out Sandy, without sustaining damage.
The insurance issue developed, and so did the projected costs. The immediate post-Sandy world was not the best environment to be negotiating flood insurance coverage for a beachfront building.
At the Nov. 20, 2012, meeting, a resolution passed, authorizing the mayor to execute a series of documents piecemealing insurance coverage from multiple sources. The cost mentioned at the meeting, totaling $82,755, was a hefty premium.
Public comment at the meeting was critical, as former Mayor Jerry Gaffney called the plan “unwise.” Others, including current Deputy Mayor Patricia Hendricks, said the city was stonewalling when it refused to release the flood elevation certificate.
By 2015, a move to recall Mahaney failed to gain sufficient signatures. One of the charges in the recall effort was that Mahaney presided over the “disastrous construction of Convention Hall.”
The following year, the city filed its lawsuit. It stated the negligence of the companies involved in the building’s construction caused the city to pay higher flood insurance premiums than it otherwise would have had to pay. The suit outlived the Mahaney administration, and it has existed under the Lear administration for over three years.
Did the city cause the building to be built too low when it put in the pilings before the outside firms initiated construction? Did the firms not realize the elevation requirements for the building, exposing the city to high annual insurance payments?
Dismissing the Suit
The May 5 resolution states the city is dismissing the case because “substantial discussion and negotiation with FEMA” has resulted in “confirmation from FEMA that the Hall is compliant as currently constructed.”
The resolution goes on to say that the last remaining issue concerning flood insurance payments is not worth continued litigation. The special council handling the litigation for the city advised that “the cost of litigating that claim to conclusion would far outweigh the value of that claim.” The council decided “the best interests of the city would be served by accepting the FEMA assurances, and consenting to the dismissal of its lawsuit.”
There was no word, if any, on what changed, regarding FEMA standards. Nothing was said about why it turned out that the Hall was compliant after substantial discussions.
Did the city spend $448,000 litigating over a building that was always compliant? Is there any import to the statement that the city is “accepting FEMA’s assurances?”
Whatever the lingering questions may be, the lawsuit has ended. It remains uncertain if the insurance premiums will decrease.
City Solicitor Frank Corrado responded to a question on that issue by saying that the city can take the results of its FEMA discussion to its insurance carrier and see if the carrier is willing to lower the premiums.
To contact Vince Conti, email vconti@cmcherald.com.