An insurance company that paid $1.8 million in damages after fire destroyed a downtown office building is going after one of the former tenants, Anjou Spa.

The Bend Fire Department’s investigation could not determine a cause of the September 2016 fire. But a lawsuit filed in Deschutes County Circuit Court by American Hallmark Insurance Co. of Texas states: “The cause of the fire was due to the defendants’ operation and maintenance of the dryer machines in the Anjou Spa.”

Anjou owner Jenna Walden, who held a grand opening Tuesday for the spa’s new location, said her business is not to blame.

“Our insurance company has concluded there was a no fault,” she said. “This is just throwing spaghetti on the wall and see what sticks.”

The fire at 225 NW Franklin Ave. started in the early morning of Sept. 7, 2016, and burned so hot that firefighters quickly switched to a defensive mode. The Bend Fire Department concluded that the fire started in an employee break room/laundry room at Anjou Spa in Suite C, but was unable to further pinpoint the cause, said Larry Medina, deputy chief of fire prevention.

The drier was burned inside and out, he said. The room also held a washing machine and a towel warmer, he said.

Multiple private investigators worked the scene, and they might have obtained their own forensic evidence, or they might draw a conclusion based on a lower standard of evidence, Medina said. The suit, filed Dec. 13, does not go into detail about how American Hallmark believes the fire started. The insurance company’s lawyer, Jennifer Crow of Scheer Law Group LLP, in Portland, said she wouldn’t comment on pending litigation.

The building’s owner, Kenneth Sherrill, lost more than $1.8 million by way of building repair costs and lost rental income, and losses are ongoing, according to the complaint. Sherrill is rebuilding the structure, which is known as “Kate’s Place.”

Anjou had enough insurance coverage that it won’t be on the hook for damages if American Hallmark is successful in court, said Nathan Steele, a Bend attorney who represented Anjou in a claim against its own insurance company. Oregon requires insurance company lawsuits to name as a defendant the person or business who’s allegedly at fault, he said, but the case will be handled by Anjou’s insurance company.

“They’ll provide the lawyer, they’ll provide the indemnity,” he said.

Insurance proceeds helped Anjou reopen in a new location, 1835 NW Pence Lane, near Broken Top Bottle Shop, but it didn’t cover everything, Walden said. The day spa is in a 3,000-square-foot space that features a sauna with infrared heat and heated sand, a steam room, four massage rooms, two esthetician rooms and a nail salon.

Walden started Anjou in 2009, and the spa built a following with its monthly membership program.

“The average spa visitor is once a year,” she said. “Now we’ve got a community who sees us every month.”

Anjou customers were allowed to pause their memberships until the full facility re-opened, but many of them followed the spa to its temporary location, which until July was a west-side residence, Walden said.

“We were lucky enough to be able to maintain our employees,” she said. “Even though they were taken care of, people just like the work. It was enough to keep clients aware we were coming back.”

Anjou’s new home features a charred-wood wall as a recognition of the spa’s history, Walden said. But it could be some time before she can forget the event. “We’re still working things out with our insurance company, too,” she said. “I expect this to go on another year.”

— Reporter: 541-617-7860, kmclaughlin@bendbulletin.com

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