A Del Rey condominium association has received a $4.1 million settlement approved by the U.S. Bankruptcy Court for the District of Delaware related to numerous construction defects at the complex.

The 77-unit residential building at the Indigo Community Association on Glencoe Avenue reached the settlement in mediation less than two years after filing a complaint in Superior Court, attorneys for the plaintiff said. The recovery is being funded by insurance companies for the builder, general contractor and 40 subcontractors.

A $1 million deductible had to first be satisfied in order to trigger the larger insurance policy. This was accomplished by segregating the proceeds from sale of three penthouse units, previous assets of the bankrupt builder, plaintiff attorneys said.

The complaint charged that substandard waterproofing at the complex caused leaks in the dwelling units, the lobby, and through the podium deck whenever it rained. In addition, the framing of the elevated walkways suffered so badly from being constantly saturated that emergency shoring was erected to protect against further decay and collapse, according to the complaint.

“We knew we had serious building issues but we did not know how the builder’s bankruptcy would impact our ability to recover enough funds to repair all of these defects,” said Dan Stern, president of the homeowners association. “After many months of investigating, testing, and mediating our claims, restoring the value to our community association and in our homes is our primary focus.”

The units were sold as luxury condominiums in 2007 by WL Indigo Associates LLC and WL Homes, part of Irvine developer, John Laing Homes, the plaintiff attorney said. In February 2009 WL Homes and John Laing Homes filed for Chapter 11 bankruptcy as part of the downturn of the economy and the building industry.

“Oftentimes, condo owners don’t realize that insurance and assets exist to cover construction defect claims even after the builder declares bankruptcy. And California Condo Associations do have protection, even when faced with claims against parties in bankruptcy courts,” said attorney Thomas E. Miller of The Miller Law Firm.

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