The next-to-the-last outstanding Supertyphoon Pongsona insurance payouts slipped through the hands of the owner of the Sherwood Guam Resort on Oct. 29. Typhoon loss settlement checks from three insurance carriers for $3.325 million were made out to both Sherwood Guam Resort and First Commercial Bank. The checks were endorsed by Sherwood and handed over to the bank which has a loan agreement with the hotel company.
The total Sherwood settlement amount including several preliminary partial payments came to $9.45 million.
Supertyphoon Pongsona Guam’s costliest natural disaster wrecked the Tumon Bay hotel when it raked Guam on Dec. 8 2002. The Sherwood which is situated in the center of Guam’s tourism belt has become Guam’s worst eyesore and a symbol of the island’s depressed economy.
Richard Chen company representative on Guam for Chung Kuo Insurance Co. Ltd. lead carrier on the Sherwood claim said the amount was a negotiated settlement and that Sherwood had sought $25 million.
Despite the fact that the Sherwood had been mothballed and empty since a decline in business in 2001 which meant it did not include money for business interruption the insurance payment was among Guam’s five largest settlements for Pongsona damage. Insurance experts said the Hyatt Regency Guam and the Outrigger Guam Resort which both had settlements of about $20 million were highest. Most Japanese-owned hotels on Guam were uninsured for Pongsona.
The Sherwood property has been jinxed from the start. It languished in mid-construction for years. In June 1993 Fletcher Pacific Construction took possession of the hotel after developer World Bell Inc. defaulted on loan payments. Fletcher won a first-priority lien on the property bought the partially built structure for about $9 million at auction then sold the hotel to Sherwood a Taiwan hotel company which operates the 350-room five-star Sherwood Taipei. Fletcher then began a new contract with Sherwood to complete the Guam project but they fought heavily during construction. Sherwood blamed Fletcher for the cost of switching out every toilet in the hotel when Guam law mandated low-volume tanks during the construction period. Sherwood Chairman B.V. Riu called Guam Business magazine at that time with complaints about the construction process and later refused to allow Guam Business to photograph the hotel when it was near completion because it might highlight Fletcher’s work. Their dispute ended up in arbitration. The hotel opened April 28 1998.
Keith L. Farrell vice president and general manager of Dick Pacific Construction Co. Ltd. (Guam) the company that acquired Fletcher’s Micronesia operations was with Fletcher in the 1990s. Farrell was hired to make an independent assessment of the damage claim. “It’s in pretty bad condition ” he said. “Lots of broken glass broken windows and mold throughout the entire interior — very bad damage. Basically the interior all needs to be pulled out and redone. All of the dry wall needs to be replaced.” Farrell said it would cost “$9 million-plus” to bring the hotel back to standard.
The typhoon loss settlement was shared by three insurance companies – Chung Kuo was the lead carrier with 60% of the risk and Aioi Insurance Co. Ltd. and CGU each carried 20% of the risk. The general agents on Guam who represented the carriers were Great National Insurance Underwriters Inc. for Chung Kuo Takagi & Associates Inc. for Aioi and Aon Insurance Micronesia (Guam) Inc. for CGU which now goes by the name Aviva.
Domie B. Bumagat Jr. president and chief executive officer of Great National said the payment was his office’s largest in its 31-year history on Guam the next being a $3 million payment for earthquake damage to the Grand Hotel in Tumon in 1993. Bumagat said “This was the worst of all the storms in its history on Guam for Chung Kuo.” He said Great National was pleased to have been able to settle with a client but he is disappointed to lose the Sherwood as a customer — carriers and insurers would want the hotel repaired before considering further insurance. Bumagat said payments for Pongsona damage claims to GNIU’s customers amounted to $15 million — about $9.45 million for Sherwood plus another $5.55 million to homeowners and commercial property owners. Total Pongsona payments by Chung Kuo which also employs Alpha Insurers as a general agent amounted to $23 million.
Chen said Chuang Kuo has served the insurance market through dozens of natural disasters and is here to stay. “We’ve been here for 32 years. We’ve been through all the typhoons the good and the bad and we’re committed to being here for another 32 years ” Chen said.
Chung Kuo also was hit hard by a payment for a Ponsgsona damage claim from the Guam Telephone Authority. That policy was written by Alpha Insurers.
The last unpaid claim for Pongsona damage involves M.V. Pangilinan Enterprises Inc. which does business as Ace Hardware Mark’s Motor Co. and Mark’s Sporting Goods and many leading commercial buildings. Mark V. Pangilinan confirmed on Dec. 5 that his claim for damage to many commercial buildings in his retail commercial and automotive conglomerate had not been settled. Pangilinan is at odds with Dongbu Insurance Ltd. over the amount it will pay on his policy coverage. MVP’s policy coverage with Dongbu for typhoon damage is $7.5 million for a total loss. Dongbu has made advance payments of $1.5 million and has offered to settle for $2.5 million. A loss adjuster employed by MVP told the Journal in February he believed the covered losses are more than $3.5 million. MBJ