Embassy's Wastewater Line Failure Leads to $90,000 in Costly Repairs for Co-p

The small, eight-unit Lenox Hill co-op had recently invested in state-of-the-art boilers and depleted its reserves when tragedy struck. A wastewater line failure swamped the co-op’s boiler room and basement. After months of excavation and testing, the co-op board determined it was sewage from the neighboring building — an embassy — that was flooding their basement and turned to their own insurance carrier for repair funds. However, the carrier denied coverage citing wear-and-tear exclusions, and recommended filing a lawsuit against their neighbor.

Not to be deterred, the board hired a public adjuster, who made the same recommendation as the insurance carrier — take the neighbor to court. The board treasurer, however, believed a direct claim to the neighbor’s insurance carrier could be effective. The co-op’s property manager, Aaron Weber of Weber Realty Management, wrote a letter to the neighbor’s attorney asking for the name of its insurance carrier and requesting the building make the necessary wastewater repairs. Because of this, the neighbor’s insurance carrier began a four-month investigation into the matter. 

The deluge had put the co-op in a financial bind. More than $80,000 was needed to cover the excavations and tests, another $100,000 for the actual repairs, as well as additional costs for legal and architectural fees. To pay its mounting bills, the co-op took out two $175,000 lines of credit from the National Cooperative Bank at a 6.25% interest rate. 

If at first you don’t succeed. As the investigation came to an end, the management and the board secured a face-to-face video meeting with the claims specialist for the building’s carrier. On the call, the board treasurer clearly articulated the emotional trauma the flooding caused. “She explained how hard it was to live in the building with the smell of sewage,” Weber says. The board also provided a breakdown of all the expenses and how it had been advised to file a lawsuit. “Within two days, the carrier said it would meet our demands in full,” he says. “We were pretty surprised it agreed to pay the entire amount.”

The money covers the cost of the extensive repair project, which included digging trenches in the co-op’s basement, excavating the bottommost floor of one shareholder’s triplex unit, as well as the use of cameras and dye tests, which established that the embassy’s sewer and water main lines were the source of the damage. “Sewage and water were seeping into the soil, flowing into the property,” Weber says. 

During the excavation, the co-op took the opportunity to carry out $90,000 in repairs to its own decades-old wastewater pipes. These costs were not included in the claim. Weber believes it is possible the pipe deterioration was the result of utility work in the street and a fiber-optic cable installation. “If your street is turned to Swiss cheese, you might want to hire a company to scan your pipes and see if there's any damage,” he advises. The next steps for the building are to pay back the line of credit and build back its capital reserves.