After insurance claim was denied, rental company sues Kentucky city over building collapse

A former Winchester rental company has filed a lawsuit against the city of Winchester and other defendants, alleging that the company was wrongfully denied on an insurance claim after its downtown building collapsed because the city failed to maintain its rain run-off system.

Cartwright Rentals on Monday filed a lawsuit in Clark County court against Winchester, Winchester Municipal Utilities Commission, the Kentucky League of Cities (KLC) Insurance Services, and the KLC Insurance Agency.

Cartwright Rentals owned and operated a commercial building located at 14 East Broadway Street in Winchester, which the company says collapsed as a result of significant disrepair to a culvert and culvert walls during a “non-extraordinary rain event,” according to court documents.

At the time of the collapse, it was determined by the city and their engineering company, Palmer Engineering, that there were obvious structural failures to the culvert, and washout areas had undermined some of the building’s ground floor slab, according to court records.

On the day of the building’s collapse, 2.78 inches of rain fell, according to court documents which cited Kentucky Mesonet, the state’s official weather source. Cartwright Rentals said in its lawsuit that this was neither extraordinary nor unprecedented weather.

At the time of the building’s collapse, Cartwright Rentals was insured by the KLC Insurance Services and the KLC Agency.

In May 2022, the insurance services company and agency denied Cartwright Rentals on its claim, stating that “there is no liability on the party of the City of Winchester for the damages to your property,” and the agency would “not be able to to assist in paying for the damages and/or repairs made to your property,” according to court records.

The basis for the denial was that “the flooding on (the) property was due to a lack of capacity within the system to handle such a significant rainfall from an unfortunate storm, that no reasonable City could design and construct,” according to court documents.

But Cartwright Rentals has objected to the explanation for the denial, saying in the lawsuit that the building collapse was caused by the “dilapidated conditions” of the culvert, which the company asserted that the city was responsible for.

“The collapse of the building and the losses suffered by Cartwright Rentals were clearly not due to the water infiltration, were instead caused by the defective condition of the culvert and culvert walls,” Cartwright Rentals said in its lawsuit.

The lawsuit says that the insurance denial didn’t mention Cartwright Rentals’ loss related to the collapse of the building -- roughly $3,700 a month through commercial and residential rentals, according to court documents.

Court documents state both the KLC Insurance Services and KLC Agency failed to property investigate the claims made on behalf of Cartwright Rentals and lacked basis for denying the claim. The document also states the defendants acted with reckless disregard for whether a basis for denying the claim was needed.

The lawsuit alleges that the KLC insurance entities “acted outrageously towards Cartwright Rentals” by failing to properly investigate the insurance claim and misrepresenting issues relating to the insurance coverage.

Cartwright Rentals claims in its lawsuit that the city and municipal company were negligent, and the insurance services and agency companies violated the Kentucky Unfair Claims Settlements Practices Act.

Due to the collapse of the building, Cartwright Rentals sold the building to the city because it was no longer habitable or safe, and it needed to be demolished, court documents stated.

Collapsed building was same structure that a child fell from

After Cartwright Rentals sold the building to the city, it was condemned for use, according to court records. A child fell from a skylight on the building in April and suffered traumatic injuries, attorney Elliott Miller confirmed. Miller represents Cartwright Rentals in the lawsuit.

The boy, who was identified as Kameron May, fractured his skull along with other injuries, according to the Winchester Sun. He was in critical but stable condition after the incident, according to the Winchester Sun.

Winchester Mayor Ed Burtner said he had not yet seen the lawsuit, and had no comment on it. He also did not comment on how the city takes precautions to keep people out of condemned buildings.

Winchester, Winchester Municipal Utilities and Kentucky League of Cities Insurance had not filed a legal reply to the lawsuit as of Wednesday morning.