Caneel Bay was “grossly underinsured” when Hurricane Irma hit, the resort’s insurer wrote in court documents filed earlier this year. The documents shed some more light on what may be happening behind the scenes at Caneel Bay. As you likely have read here on News of St. John, the property has sat in shambles since September 6, 2017, the day Hurricane Irma hit St. John.
According to the documents, CBI Acquisitions chose to obtain property and business interruption insurance for a total limit of $32 million per occurrence. This was “despite its own determination that the total insurable value was $65,413,068,” its insurer wrote in court documents. “Thus, the Caneel Bay Properties were grossly underinsured,” the insurer continued.
Caneel collected $32 million from damages sustained during Hurricane Irma. It filed a separate claim for $32 million following Hurricane Maria. The insurer denied that claim stating:
“Based on the evidence available, there is no additional damage caused by Hurricane Maria that was not considered in the scope of damages from Hurricane Irma. Specifically, the Report concludes “that there is no additional scope required to address the effects of Maria on the subject property that is not already included in the repairs required to address the effects of Irma. Thus, at this time, Insurers have not identified any damages covered under the Policy from Hurricane Maria.”
There is a clause in the insurance documents that states the two parties can go to arbitration if an agreement cannot be made with regard to claims. When the two sides could not agree on an arbitrator or umpire, the insurers filed a lawsuit.
“This lawsuit arises out of an insurance coverage dispute. Caneel Bay Resort and surrounding properties on St. John, U.S. Virgin Islands, owned by CBIA, suffered significant damage from Hurricane Irma,” the lawsuit reads. “CBIA and the Insurers (the “Parties”) resolved the Hurricane Irma claim with the Insurers paying out the $32 million limit of coverage. CBIA, however, contends that it suffered a separate $32 million loss as a result of Hurricane Maria. As the Parties could not agree as to the scope of covered damages arising from Hurricane Maria, if any, the subject insurance policies’ arbitration provision was invoked by CBIA. The election of arbitration triggered a requirement that each party appoint a “competent and disinterested” arbitrator and then the party-appointed arbitrators were to appoint a neutral umpire.”
It is unclear whether an arbitrator and umpire was agreed upon or whether CBI Acquisitions received an insurance payout stemming from Hurricane Maria, as the lawsuit was voluntarily dismissed one month after its filing.
CBI Acquisitions has publicly stated that it will cost an estimated $100 million to rebuild Caneel Bay. Last spring, they asked the federal government for a $70 million payout in exchange for them walking away and handing the resort back to the National Park Service prior to the expiration of their Retained Use Estate agreement. That agreement expires in late 2023. If they do not receive the payout, CBI Acquisitions could very well hold onto the property and leave it as is for the next four years. It does not appear that they are required to repair any of the damages sustained during Hurricane Irma prior to the end of their leasehold.
CBI Acquisitions is also being sued by Bluewater Construction, Inc., a company hired to renovate several units at Caneel Bay prior to the 2017 hurricanes. This is a completely separate lawsuit and is not related to insurance coverage or the hurricanes. According to court documents, CBI Acquisitions owes Bluewater Construction, Inc. $214,416.55 for breach of contract, and breach of duty of good faith & fair dealing. That lawsuit is ongoing.
We reached out to CBI Acquisitions and Bluewater Construction, Inc. for comment. We received read receipts from both, however neither have responded.