Recovering from a fire on new construction townhome project

[Sean Coppom]

Hi all,

I'm looking for answers to a couple questions and any overall advice people have to share as we try to navigate through the nightmare of recovering from a fire. Some quick background. Our project started with buying a SFR, scraping it, working with an architect, submitting SDPs etc., in order to build 4 townhomes in Denver. Like most projects seem to go, we spent more and took way longer than planned to get them built. We were at the final stages of the project, with all of them under contract, and about a month or less left to finish them up and obtain COs for all units. Then one Saturday morning we got a call that there had been a fire and significant damage, apparently caused by a few homeless guys sheltering in a semi-enclosed space between the garages and the back units. We completely lost the four single car garages, one of the back units, a significant portion of the other back unit, had holes cut in the party walls by the firefighters and moisture damage to the floors in the front units. This occurred in mid-November, and fire remediation took until the beginning of this year. Insurance handled that part of the claim fairly well, as we used one of their preferred vendors and they were paid out directly.

At that stage we had our contractor start putting the budget together for the rebuild, which took a little while with getting bids from subs etc.  We have a replacement cost policy, and after starting this project in 2018, costs have gone up significantly on the rebuild.  Insurance has requested more and more details, which we have provided, but has told us that their numbers are significantly different from ours and recently brought one of their preferred rebuild vendors to the site to provide a different quote.  Before that, they gave us a number which is ridiculously low.

The fire couldn't have happened at a worse time with the construction loan fully drawn and ongoing high monthly interest payments that are bleeding money out of the project.  I wake up everyday with a stomach ache just thinking about all this.  So I'm looking for some help with a couple things.

One, advice on insurance and how to handle them.  We can't spend months looking to come to an agreement on the rebuild cost. At what point do we hire a lawyer and proceed down that path?  If the quote from their preferred vendor comes back low as well, which I'm assuming will happen, how should we proceed?  Get another quote, lawyer up at that point, do something else?

Second, we've had issues with our GC on the original build, and some hesitation about using him for the rebuild which we would try to address with a more bulletproof contract, but would anyone actually consider using the preferred vendor that insurance is getting a quote from?  One of my main concerns is how the builder's warranty would be handled by having two builders in the process.  Does anyone know how this would work?  Other potential problems we could face down the road by switching contractors?

Third, I'm grateful for any other advice from people who have been down this road or can provide helpful guidance or points of consideration.  Navigating this to the end is going to be a long road and the loss we'll eventually take is a hard pill to swallow.  

Thanks in advance.