The Tribune-Courier last week filed an open records request under the Kentucky Open Records Act with the Marshall County Health Department seeking the release of details of a settlement agreement with architect Kevin Perry. The MCHD board had brought a lawsuit against Perry in 2012 stemming from the faulty design of the agency’s building on Slickback Road in Benton.
The details of the settlement had been sealed since late 2014 based on an agreement between parties in the case that it remain confidential. However the Tribune-Courier contended sealing the records was not allowed by law because the health department is a taxpayer funded public entity.
On Friday, Jason Darnall, who served as attorney for the health department in the case, released the agreement pursuant to the Tribune-Courier records request. It reveals the health department settled its claim against Perry for $225,000 to conclude the litigation.
The $225,000 settlement, combined with $24,500 awarded in late April in a civil suit against Clever Construction, the building’s general contractor, amounts to only about 8.5 percent of the total cost of $2.1 million to reconstruct the facility. The reconstruction was necessary to bring the building in compliance with seismic and Americans With Disabilities Act (ADA) codes.
Darnall said while the settlement is small relative to the amount required to rebuild, “it’s not an insignificant amount” and more than he thought might ultimately be recovered because Perry was uninsured at the time of the litigation.
Darnall explained when the design phase of the project began in 2010, Perry was bound by contract to provide a certificate showing he had errors and omissions (insurance) coverage. At that time Perry and an engineer designed plans for a location on 12th Street where the Children’s Arts Center now sits.
The MCHD Board ultimately scrapped plans for that location and chose to build the facility on Slickback Road. In the time that passed between the original draft of the architectural and engineering plans for the facility on 12th Street and the current location, Perry’s engineer died. Perry then chose to act as his own engineer, which Darnall said was legal for him to do. But, he said, the plans weren’t amended to reflect the difference in subsurface soil content, which resulted in the use of incorrect seismic bracing materials. Perry’s designs also included restrooms which did not meet ADA specifications.
Darnall said before the construction of the new MCHD facility was completed, Perry closed his private practice and joined ACE Design in Murray. In doing so, he allowed his professional liability insurance coverage to lapse because he was now insured by ACE. The problem, Darnall said, was that ACE’s insurance didn’t cover Perry’s prior work. Perry also had not purchased “tail” insurance to cover his previous work as a private contractor. Therefore when the MCHD made its claim in April 2012, Perry’s work on the building was not insured.
Darnall said after attempts at mediation, it was determined ACE’s insurer could and probably would successfully deny coverage for the MCHD claims because the policy expressly excluded claims arising from Perry’s previous work before joining ACE. They decided to enter negotiations with the insurance company despite those provisions to see what they could recover and finally, an agreement was reached.
“All the experts agreed Kevin Perry made the errors,” said Darnall. “We could have gone after him for the full $2 million but then he walks into the courthouse and files bankruptcy and we get nothing. A judgment isn’t anything unless you can actually collect on it and we got a settlement we could collect.”
Darnall said even if Perry had still been insured, the MCHD wouldn’t have recovered the full cost of the reconstruction. He said Perry’s coverage was only for $1 million and it was “cannibalizing,” meaning all lawyer fees, expert witness fees, cost of action and expenses come off of that. Best case scenario, he said, would have been a recovery of around $900,000.
“The total recovery was around $300,000 (with savings in legal fees) which is not $900,000 but it’s not zero either,” he said. “I hate it. But I can’t think of anything we could’ve done to stop it from happening.”