Free Brief in Support of Motion - District Court of Colorado - Colorado

Case 1:01-cv-02018-RPM-MJW

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

APARTMNTlNSTMENT AN MAAGEMENT COMPAN, aIa
ArMCO, a Marland corporation,
Plaintiff
v.

) )

)
)

) )
) )

Civil Action No. OI-M-2018 (MJW)

NATIONAL UNON FIRE INSURCE ) COMPAN OF pmSBURGH, PA., a )

PelUylvan corpration, )
SECUR INSURCE COMPAN OF )
HATFORD, a Connecticut corporation, )

corpration, )
ROGER METZGER ASSOCIATES, a New )
Defendants.

FIRST CAPITAL AGENCY, INC., d//a ) FIRST CAPITAL GROUP, a New York )

NATIONAL PROGRA SERVICES, INC., a )

and )
I) I am a parner in the Washington, DC offce of

New Jersey corpration, )
VITO B. GRUPPOSO, a New Jersey resident, )

York corpration )
) )

REPORT OF HERBERT E. WALTER
waterhouse Coopers LLP. I have more Price than 25 years of diversified business and financial experience. My work generally has

involved applying my financial, accounting, and quatitative background to the analysis of business tractions, development of financial models, evaluation of performance, and assessment of condition.
2) My experience includes evaluating the performance and financial condition of

numerous

companies across a varety of industres. This work has been perform for puroses of improving financial mangement and business performnce, evaluating financial decisions,
assessing financial means, determining liability in adversar proceedgs, and quantifying alleged damages.

3) I base my findings and observations on the summarzed work and analysis described below, the documents I have reviewed in this matter, as well as my background and experience. 1 have included my Resume and Schedule of Testimony Provided during the Previous Four Years as of October 2004. (See Attchment I)

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Herbert E. Walter

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4) I have been asked by Bartlit Beck Herman Palenchar & Scott LLP ("Bartlit Beck') on behalf of its client, Apartent Investment and Management Company, aIa AIMCO ("AICO") to analyze certin information related to the payments made and reimbursements received by AIMCO for AIMCO's propert insurance coverage for the one million dollar limit ("one million dollar layer" or "primar layer"), placed with Security Insurance Company of Harford ("Securty of Harford") and National Union Fire Insurance Company of Pittsburgh, P A ("National Union").
5) Also at Bartlit Beck's request, I may review other information provided in this matter

including the testimony of witnesses, documents produced or introduced as exhibits, and
report or testimony of expert(s) and, as appropriate, testify in rebuttL.

FINDINGS
6) For the $1 million layer of propert ince, AICO paid $7 million in excess of

amount that it was reimbured. In arving at this number from an accounting standpoint, I have deducted the entirety of two payments totaling $10 milion received by AIMCO from the Lockton Companies, Inc. ("Lockton") and Lumbermens Mutual Casualty Company ("Lumbermens"). I understad that it will be a matter for the Cour to determine whether defendants are eititled to this credit. To the extent that the Cour determines that defendants are not entitled to some or all of this credit, the total amount that AIMCO was not reimbured would be increased dollar for dollar up to a maximum of $17 million. (See
Attachment 2)

the

7) It is my understanding that Colorado calculates prejudgment interest at eight percent i. Should the Cour find in AICO's favor and award $7.0 million plus prejudgment
prejudgment interest to be $5.0 million as of September 2004. Should the Court find in AIMCO's favor and award $17.0 million plus prejudgment interest,.f calculate the amount of prejudgment interest to be $6.0 million as of September 2004. (See Attachment 3) I expect to update this calculation Dr the amount of awarded through the appropriate date of interest, I calculate the amount of

the judgment, plus post-judgment interest, as

applicable.

SUMMARY OF ANAL YSfS AND RATIONALE

Amonnt Paid
8) In early 2000, AIMCO sought $ 10 million propert coverage for its properties.

9) In March 2000, AIMCO secured propert coverage for thee years subject to a $10 million limit for $32,122,742, including a $350,000 brokerage fee. AIMCO funded this policy with a $3,527,274 down payment and a commercial premium finance agreement ("PF A")

i Colorado Revised Statutes §5-12-102
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in the amount of$28,595,468 with AFCO Credit Corporation ("AFCO") to be repaid in 10
quarterly payments"

10) From March 2000 though September 2002, AIMCO paid $34.9 milion, including $2.8 million in financing charges related to the AFCO PF A. 3

II) AICO was charged a thee year gross premium in the amount of $20,616,819 for the
primary layer propert coverage layers for claims greater than one milion dollars up to $10 million.

of propert coverage, and the balance of$ 1 1,155,923 related to two excess 4

12) The propert coverage for the one

million dollar layer for AICO was placed with

Security of Harford, effective Februar 29, 2000 with a policy premium of $ 1 4, 736,3 785
and $5.9 million in agent fees. April 28, 2000 with a premium under the Securty

6 This Securty of Harford policy was cancelled effective calculated $13,960,51 i retu premium.' The two month eamed of Harford AIMCO policy was calculated to be $775,8678

13) The one million dollar layer propert coverage was secured with a Nation Union policy, effective April 28, 2000 through April 28, 2003. National Union quoted the policy

premium as $15,152,0199
14) In October 2000, AIMCO agreed to a $10 million payment to secure a renewal quotation for the second year of the primary layer propert coverage with National Union. 10 To fund
this payment, CananwillInc. ("Cananwill") advanced $10 milion on behalf of AIMCO, 1 1

and AICO remitted two five million dollar payments, one in December 2000 and one in
Februar 2001, to satisfy this obligation. 12

Return Premium
15) All of

the policies comprising the $10 million propert coverage were cancelled after the

first year. The one million dollar layer of propert coverae was cancelled effective April 28,2001, and the excess p,ropertycoverage layers up to $10 million were cancelled effective March i, 200 L 3
16) It is my understading that for the period March 2000 though April

2001, including

additional propert coverage and deleted propert coverage, the res\llting return premium
i AIM 0033001 _ 4 3 AIM 0032999, AFCO 0457 4 AFCO 0235

'S80471
6 Deposition of

Robert Ratner, March is, 2004, pages 81 ~82

7 ARTIS 3586-888
· S8 0410, NPS 001872

9 S8 0124 - 179 10 Deposition of Jeffery Adler, August 21,2003, pages 34-35, 38
11 NU 00493, CPF 0140 - 141 12 S8 0235 - 238, AIM0032985, AIM0032989 Il SB 0409
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for the one million dollar layer was calculated to be $12,509,834.14 This value includes Hartford policy, and 12 months of the two months of coverage under the Securty of coverage under the National Union policy.
17) It is my understanding that National Union did not provide the second year renewal

quotation associated with the $ 10 milion payment.

18) The retum premium associated with the excess propert layers from one million dollars to
$10 million was calculated to be $7,253,146.15 In April

2001, NPS trferred a payment

in the amount of$3,056,709 for the excess layer propert coverage. 16 In Augut 2001, AICO received a second payment in the amount of$3,056,709 for the excess layer
propert coverage.'? Thus, the excess propert coverage return premium due was reduced by $6,1 13,418 to $1,139,728.

19)In November 2001, AIMCO entered into an indemnification agreement with NPS. This

agreement provided that NPS would pay $70 i ,000 by December 3 I, 200 i and four

installments of$3,149,382 due: November 29, 2001; Febru 29,2002; May 29, 2002; and Augut 29, 2002.lg NPS paid $3,149,382 on December 5, 2001, '9 $3,149,319 on March 11,2002,20 and $350,000 on April 8, 2002." NPS paid a total of$6,648,701.
20) In June 2003, AICO settled its potential claims with Lockton and received a payment in with Lumberiens the amount of $3,000,000. In June 2003, AIMCO settled its litigation in the amount of $7,000,000.
21) By reducing the one million dollar layer retum premium and negotiated payment by the aforementioned reimbursements or other payments made to or on behalf of AIMCO,

AICO was not reimbursed for $7.0 millon.
22) If a portion of the aforementioned NPS payments to AIMCO did not reimburse $1. million associated with the excess layers,22 AIMCO was not reimbured for $5.9 million related to the one millon dollar layer propert coverage.

23) It is my understading that AICO has outstanding insurace claims in the amount of
$510,639 that have not been paid. These claims relate to seven events in 2000 and 2001,
and are for claimed propert damages;

lost rent due to busin!'ss inteirptioIl and other.

costs. Should the Court find in AICO's favor and award this amount plus prejudgment September prejudgment interest to be $I66,378.as of interest, I calculae the amount of

14 SB 0410 IS SB 0409 - 410

16 AIM 0032964 - 66 17 SB 0409, AIM0032969-70
" Cortez 3 \3 (AIMOOO3627), AIM0032976, AIMOOOOOO 1.8

19 AIM0032973

~ 20 AIMOO32975 _ 77

21 AIM0032980, AIM003305 i ii Deposition of Jeffery Adler, September 9,2004, page 21 i

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2004. (See Attchment 4) I expect to update this calculation for the amount awarded through the appropriate date of judgment, plus post-judgment interest, as applicable.
24) I understad that AIMCO may be entitled to attorneys' fees or other amounts allowable under the law. I have not been asked to examine such items.

DOCUMENTS
25) In connection with my work to date, the documents and other information that I have considered include the following:
. Court documents filed in this mattr including but not limited to the Original Complaint, Third Amended Complaint and Jury Demand, Third Supplemental Rule
26(a)(I) Disclosures;

. Depositions of Jeffrey Adler;

. Deposition of Grace A. Aldridge;
. Deposition of

Brian Frisch;

. Deposition of Robert J. Ratner;

. Deposition ofSar H. Wieser;

. Documents produ;ed by AIMCO; . Documents produced by AFCO;
. Documents produced by Swain and Baldwin;

. Documents produced by Lockton;

. Documents produced by NPS;

. Documents produced by First Capital;
. Documents produced by Security of Harford;

. Documents produced by National Union;

. Documents produced by Alternative Risk Transfer Insurance Strategies ("ARTIS");
. Colorado Revised Statutes §5- 12- 102.

BILLING RATE
26) My hourly billing rate is $5 i 5 per hour.

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OTHER
27) For purposes of presenting my testimony at trial, I will use exhibits in the form of schedules and graplúcs summarizing my findings and analyses. I may also use cei1ain demonstrative aids and ilustrtions to assist in presenting technical concepts and analyses.
28) While the opinions presented above are complete based upon the information and
documents made available to date, I reserve tiie nght to expand, modifY, or reduce my

above findings and conclusions based upon my review of any furter disclosure made by any other expert, additional information or documentation provided in this matter, or on testimony and exhibiìs introduced at subsequent depositions, hearings, or trial, including any testiiiony or documents produced by third parties in this matter.

t--ft/- ¿,) ~o~lfi¿/o

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