Insurance & Risk · Quorum Case Files Season 9 Companion · Custody of Proceeds
A Paid Claim Is Not a Funded Rebuild: Custody of Insurance Proceeds and the Sell-or-Assess Vote
Every other case in this season turns on a limit that was too low. This one does not. The insurers at Metairie Towers paid roughly forty-three and a half million dollars. Twenty months after the storm the owners were told, in the words a court later quoted, that “contrary to prior assertions” the thirteen million dollars left would not restore their homes. The policy delivered the money. The question the record raises is what a board owes its owners once the money arrives.
Educational notice. This information is educational in nature and should not be construed as legal or insurance advice. The Metairie Towers matter is ongoing: the only court document relied on here is a June 18, 2025 ruling on class certification, every statement about the conduct of the board, the manager, or the public adjuster is an allegation the owners have pleaded, and no court has found that anyone did anything wrong. Consult qualified association counsel and a licensed insurance professional regarding your association’s coverage and jurisdiction.
Two Hundred Eleven Units, One Pipe
Hurricane Ida crossed the Louisiana coast on August 29, 2021 and pushed north into Jefferson Parish. In Metairie stood a seven-story condominium tower built in the 1970s with 211 units. Somewhere in the wind, according to the appellate opinion that is the record of this case, a rooftop water pipe broke. The building flooded itself from the top down. When the storm cleared, 181 of the 211 units were damaged and every resident was ordered out.
What followed, for a time, looked like a functioning claim. Between October 12, 2021 and March 8, 2022 the association collected $7,699,222 from its insurers. The estimate for the Ida damage was $39 million. Then two things happened that the owners would later put at the center of a lawsuit. First, according to the owners’ account as the court recites it, the association’s manager wired $400,000 of insurance proceeds to what the opinion calls a “cyber pirate.” Second, about a month after Ida, a second water event: the owners’ petition says vendors working for the insurer turned the water back on in a building that was already open to the studs in places. The estimate for the second event was $14 million. The combined estimate stood at $53 million.
The money kept arriving. A settlement in December 2022 brought $25,861,840.52. A further $10 million was recovered for the second water event. Together with the first six months of collections, the association had received roughly $43.5 million. Against a $53 million estimate, the recovery was about nine and a half million short before a dollar was spent, which is a shortfall but not, on its own, a catastrophe. The building was gutted. The owners, 211 households, stayed out.
In April 2023, twenty months after the storm, the owners received a notice. The court quotes three words of it: “contrary to prior assertions.” The roughly $13 million remaining would not restore the units. The owners were offered a choice between a special assessment to finish the rebuild and a sale of the building. They voted to sell. Sellers’ counsel, the law firm Stone Pigman, announced that the building sold for $24.5 million, that the price came in $2 million over appraisal, and that the transaction was the first of its kind under a new Louisiana partition law; those three facts come from that announcement and from nowhere in the court record. The opinion itself records that the sale proceeds were to be distributed pro rata by bedroom count. Then the owners sued, as a class, their association and its board, the manager, the public adjuster, and ten insurers.
That is the whole arc: a loss, a paid claim, a gutted building, a letter, a vote, a sale, a lawsuit. It is not the mechanism most boards picture when they think about insurance risk, because the risk most boards picture ends on the day the carrier agrees to pay.
The Mechanism: What Happens After the Limit Pays
A property insurance policy is a promise to deliver a large sum of money to a volunteer board on the worst day in the building’s life. Nearly all board attention goes into the size of that promise: the limit, the deductible, the exclusions, the replacement-cost basis. Those are the subjects of the other seven articles in this series. Almost none goes to the second half of the transaction, which begins the moment the first check clears. The vocabulary below is general insurance and governance language, not a description of any Metairie Towers policy, whose terms the record does not disclose.
Proceeds arrive in pieces, over a long time
A large property claim is almost never paid in one check. Advances come early for mitigation; undisputed portions are paid as adjusted; disputed portions are negotiated, appraised, or litigated and arrive months or years later as a settlement. The Metairie Towers record has exactly this shape: $7.7 million in the first six months, a $25.9 million settlement fifteen months after the storm, a separate $10 million for the second event. Nobody hands the board a single number that says “this is all you will ever receive.” The board assembles that number itself, or it does not have it.
The estimate moves, and it is not the cost to finish
A damage estimate is a snapshot that changes as the building is opened up, as a second event occurs, as pricing moves. More importantly, an estimate of damage is a claim document prepared for the carrier; the cost to complete the rebuild from where the project stands today is a construction budget prepared for the owners. A board tracking only the first can believe, in good faith, that $43.5 million against a $53 million estimate is a manageable gap while the second number is quietly saying otherwise.
Money leaves the account before reconstruction begins
Demolition, drying, remediation, engineering, adjusting fees, legal fees, and carrying costs are all paid from proceeds before a single wall goes back up. At Metairie Towers roughly $43.5 million came in and roughly $13 million was left by April 2023. The opinion does not itemize the approximately $30 million in between, and this article will not guess at it. The governance point does not depend on the itemization: a very large fraction of a recovery can be consumed by the work that precedes reconstruction, and that fraction is knowable in advance only if someone is reconciling the account against a rebuild budget as the money moves.
Proceeds are association funds, and custody is a control problem
Insurance proceeds are association funds held for the owners, and every control that governs the operating account governs them. The difference is scale. An association that moves a few hundred thousand dollars a year may, after a loss, move tens of millions by wire over eighteen months, with three sets of hands on the process: the board, the manager, and a public adjuster retained to work the claim. The Metairie Towers owners allege that $400,000 of proceeds was wired to what the opinion calls a “cyber pirate.” The record does not say how it happened, who was deceived, or by what means, and nothing here describes what occurred. What the record establishes is that the allegation exists, that the sum was proceeds already collected, and that the question of who was responsible for custody is now before a court.
The sell-or-assess vote is a governance decision, not an insurance outcome
When the numbers do not close, an association has, in general terms, three paths: a special assessment, a loan, or a sale with distribution of the proceeds. Each is a decision for the owners under the governing documents and the applicable statute. What the board’s handling of proceeds decides is when the owners learn they face the choice and what they know when they make it. An owner asked to vote on an assessment of unknown size, twenty months after leaving home, told that prior assurances no longer hold, is voting in a very different room from one told in month three that the recovery would fall short and shown the reconciled numbers each quarter since.
The Declarations Page
Every episode of this season stops once to read the declarations page: what the board thought it had bought, what the policy actually provided, and what the distance cost. The Metairie Towers record does not give us the policy limits, the layering among the ten carriers, the deductibles, or the renewal history. So the page read here is a ledger rather than a policy, and the three columns are the ones the owners’ own claims are built on.
| What the owners say they were told | What the ledger shows | What the distance cost, and who paid |
|---|---|---|
| The April 2023 notice, as the court quotes it, begins “contrary to prior assertions.” Before April there were, by the notice’s own words, assertions. The owners plead that they were told the money would bring them home and that they relied on it; that is the detrimental-reliance count. | Estimated damage, $53 million ($39 million Ida, $14 million second event). Collected, roughly $43.5 million ($7,699,222 through March 8, 2022; $25,861,840.52 in a December 2022 settlement; $10 million for the second event). Alleged to have been wired away, $400,000. Remaining in April 2023, about $13 million. The opinion does not itemize the roughly $30 million spent in between. | 211 units, 181 of them damaged, every household out for twenty months by the time of the letter. A choice between a special assessment of a size the record does not state and a sale. A vote to sell; a reported sale price of $24.5 million (per sellers’ counsel), to be distributed by bedroom count. Owners who held a condominium now hold a share of a sale price and a seat in a class action whose merits have not been tried. |
Two features of this ledger deserve attention. The first is that the shortfall between estimate and recovery, about $9.5 million, is not what ended the building. The recovery was large. The second is that the three words the court chose to quote from the April 2023 notice are about information, not money: contrary to prior assertions. Whatever a court eventually finds about who knew what and when, the owners’ case as pleaded is a case about the gap between what they were told and what the ledger said, and about when that gap was disclosed.
The Record
Almost everything known about this case comes from one document: AVMI, L.L.C. v. Metairie Towers Condominium Association, No. 24-CA-595 (La. App. 5 Cir. June 18, 2025), affirming the Twenty-Fourth Judicial District Court for Jefferson Parish in No. 839-979. It is an opinion on class certification. It decides one thing: whether the owners may proceed together. The facts it recites are the facts as the owners plead them, recounted for that limited purpose.
The lead plaintiff is an owner, a limited liability company named AVMI. The defendants are the association and its board, the manager, the public adjuster, and the insurers: Burlington, Greenwich, Federal, and Interstate at first, with Colony, Scottsdale, Evanston, Old Republic, ACE, and Harco added later. Three causes of action are pleaded. Breach of fiduciary duty is, in lay terms, the duty a board owes owners when it holds their money. Detrimental reliance is the claim that owners were told something, acted on it, and were harmed. Negligence per se is the claim that a standard set by law was broken. The trial court certified the class; the defendants appealed; on June 18, 2025 the Fifth Circuit affirmed, one judge dissenting. The dossier this article is drawn from does not carry the dissent’s reasoning, and it is not characterized here.
Certification is permission, not victory. It means the owners’ claims may be tried together because they arise from one storm, one building, one account, and one letter. It does not mean the board misled anyone, that the manager was negligent, or that the public adjuster or any insurer did anything wrong. Those are allegations the class now has standing to try. As of this writing (October 2026), the last raw document in the record is the June 18, 2025 opinion. If a trial, settlement, dismissal, or decertification has occurred since, it is not reflected here. The record does not name any director, the management company, the public adjuster, or the buyer, and this article does not either.
What a Board Does With This
The practice that follows is drawn from CICSC Standard FIN-006, Master Policy Insurance Adequacy Review, and from CICSC Standard FIN-003, Cash Controls and Independent Verification, applied to the moment a claim begins to pay. It is a description of governance practice, not advice about any association’s coverage, claim, or legal position. The theme is simple: the controls and the arithmetic a board would want on the worst day have to exist before that day, because nobody designs a control system from a hotel room while the building is being gutted.
Treat the first proceeds check as a trigger, not a relief
FIN-006 § 2.2 lists “any loss, claim, or near-miss” as an event that triggers a board review. The arrival of proceeds is the operational version of that trigger. Boards that handle it well typically open a dedicated, board-controlled account for proceeds, titled in the association’s name under its own taxpayer identification number (FIN-003 § 4), and adopt a written resolution at the first meeting after the loss that states who may initiate a disbursement from that account, who must approve it, and above what threshold two authorizations are required. The resolution is recorded in the minutes. See authorizing expenditures and spending limits and board resolutions in practice.
Dual control over every dollar that leaves, across every channel
FIN-003 § 5.3 puts the point plainly for ordinary funds: a dual-signature policy that governs checks while leaving electronic transfers to a single party controls the channel the money no longer moves through. After a loss, the money moves by wire. The practice boards commonly adopt is that the manager or adjuster initiates, a board officer approves, and no new or changed banking instruction is honored without a callback to a telephone number already on file. This is what a bank would require of a business moving comparable sums. Whether any of it would have changed what the Metairie Towers owners allege is not something the record permits anyone to say; the point is that a board holding tens of millions of dollars of other people’s money is entitled to ask it of itself.
A rebuild budget reconciled to the estimate before the first wall comes down
Three numbers belong on one page, updated at every board meeting from the first after the loss: proceeds received to date, by payment and date; the current estimated cost to complete the rebuild from today, not the original damage estimate; and proceeds disbursed to date, by category. The difference between the first two is the gap; the third shows how fast it is moving. FIN-004, Monthly Close and Tie-Out, supplies the discipline; the bank reconciliation walkthrough and tracing one transaction across the documents supply the method. The page is a standing agenda item read into the minutes, so that the first month the numbers stop closing is the month the minutes say so.
Tell the owners early, in numbers, and keep telling them
FIN-006 § 5.3 requires that a material change in exposure be communicated to members when it occurs rather than at the next annual cycle, and § 5.4 requires that communications state facts and their source without predicting claim outcomes. Applied to proceeds, the practice is a short written update at a fixed cadence carrying the same three numbers the board reads at its meeting. An owner who has seen the gap in month three, month six, and month nine does not receive a letter in month twenty that begins “contrary to prior assertions.” Counsel typically reviews the wording while a claim is open; the discipline of sending it is the board’s.
Frame the sell-or-assess decision as the owners’ vote on a reconciled page
When a gap cannot be closed from proceeds, the decision belongs to the owners under the governing documents and the applicable statute, and counsel governs the procedure. What the board controls is the quality of the page the owners vote from: the reconciled gap, the cost to complete, the estimated assessment per unit under the allocation the declaration requires, the terms of any available financing, the appraisal or offer for the asset, and the distribution formula a sale would use. A vote taken on that page is a governance act whatever the outcome. A vote taken on a letter and a deadline is a different thing. See special assessment authority and procedure and the special assessment that reprices a building.
Review fidelity and crime coverage before the loss, and D&O coverage after
FIN-006 § 3.1, question 7, asks the insurance professional in writing whether fidelity or crime coverage extends to the management company and its personnel and how it is sized; FIN-003 § 7.3 carries the same question. Whether a given policy would respond to a misdirected wire is a coverage question for the licensed professional and counsel. Separately, a class action naming the board is the kind of claim D&O coverage exists to fund, and the business judgment rule turns on whether the minutes show informed deliberation. Both are reasons the reconciled page and the custody resolution belong in the minutes from the first meeting after the loss.
When to Consult Counsel and the Insurance Professional
Boards typically bring the following to counsel and to their licensed insurance professional rather than resolving them at the table:
- How proceeds must be held, segregated, and accounted for under the governing documents, the applicable condominium statute, and any mortgagee or lender requirements;
- Whether the association’s fidelity or crime coverage extends to the management company and its personnel, and how it would respond to a misdirected electronic payment;
- What the owners must be told about an open claim, when, and in what words, while litigation or negotiation with a carrier is pending;
- The procedure and vote required for a special assessment, a loan secured by assessments, or a sale and termination of the condominium, and the allocation formula each must follow;
- The scope of a public adjuster’s engagement, its fee basis, and who holds authority over disbursements under that engagement;
- What guaranty-fund protection sits behind each carrier on the association’s program in the association’s own state.
The Season 9 Companion Series
- The Liability Limit Is Sized to the Loss the Board Can Imagine — the liability limit vs. the loss
- Eighty Percent of What? The Flood Coinsurance Clause and the Warning in the Board’s Own File — the warning the board shelved
- Who Gets the Mail: Coverage That Lapses During a Management Change — the notice nobody forwarded
- Per Occurrence or Aggregate: Reading the Declarations Page Instead of Asking the Broker — the limit the board misread
- A Paid Claim Is Not a Funded Rebuild: Custody of Insurance Proceeds and the Sell-or-Assess Vote — the proceeds and the vote (this article)
- The Appraisal Clause, Both Ways: The Lowball a Board Fought and the Award a Board Poisoned — the appraisal clause, both ways
- Same Street, Two Policies: The Renewal Decision Is the Only One That Survives the Fire — two boards, one street, two renewals
- The Twenty Percent Building: A Policy Sized to Partial Damage in a Building That Burned Whole — the building the market would not insure
Disclaimer. This article is published by the Common Interest Community Standards Council for educational and informational purposes only. It is not legal, insurance, or financial advice and does not establish an attorney-client relationship. The account of Metairie Towers is drawn from AVMI, L.L.C. v. Metairie Towers Condominium Association, No. 24-CA-595 (La. App. 5 Cir. June 18, 2025), affirming 24th JDC No. 839-979, which is a ruling on class certification only; the facts recited there are the owners’ allegations recounted for that purpose, no court has adjudicated any claim against the association, its board, the manager, the public adjuster, or any insurer, and the matter is pending as of this writing (October 2026). The sale price of $24.5 million, the $2 million over appraisal, and the characterization of the sale under a new Louisiana partition law are as reported in an undated announcement by Stone Pigman, counsel to the sellers, and do not appear in the court record. Statutory text is drawn from La. R.S. 22:2058(A)(1)(b)(iii) as amended by Act 444 of 2023 and Fla. Stat. § 631.57 (2026) as published by the respective legislatures; no carrier insolvency occurred in this matter and the guaranty-fund comparison is hypothetical. Questions about a specific association’s coverage, claim, custody of proceeds, or exposure are questions for association counsel and a licensed insurance professional. CIC-SC, its authors, and its members assume no liability for actions taken in reliance on this content.
Published by the Common Interest Community Standards Council (CICSC). Companion to Quorum Case Files Season 9, Episode 5, and to CICSC Standard FIN-006, Master Policy Insurance Adequacy Review. Part of the CICSC Member Education Library. © 2026 CICSC. Educational use permitted with attribution.