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HomeMy WebLinkAboutJuly 31, 2010 South Black Avenue Water Main Break .pdf1 Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Debbie Arkell, Director of Public Services Chris Kukulski, City Manager SUBJECT: July 31, 2010 South Black Avenue Water Main Break Update MEETING DATE: September 13, 2010 AGENDA ITEM TYPE: ACTION RECOMMENDATION: Direct the City Manager and Director of Public Services to Resolve the Goodwill Policy Claims for the South Black Avenue Water Main Leak on a case-by-case basis and make payment decisions based on the particular circumstances of each case. BACKGROUND: At the August 16th City Commission Meeting, the Commission directed staff to provide the following information to the Commission at the September 13th City Commission meeting: · Update the Commission and Community on the current status of the Voluntary Goodwill Policy as it applies to the main break · Provide a description of the City's current insurance coverage for the incident · Provide options and recommendations for possible future coverage of main breaks, either through insurance or self-funding options History. The city works hard to proactively maintain the public's infrastructure including its water and sewer mains. Routine preventative maintenance includes regular and ongoing leak detection and main replacement. In fact, the particular transmission main that failed on July 31, 2010 had been inspected for leaks on March 18, 2009 and February 12, 2010. Both recent inspections detected no leaks. In spite of our best efforts, failures happen occasionally. However, breaks that result in significant damage to private property are extremely uncommon; we have records of only 3 leaks that resulted in significant private property damage in the last 34 years (1975, 2007 and 2010). We also contacted Billings, Missoula and Portage, MI who also indicated the rare nature of damaging water main failures. 101 2 Unfortunately, much more common are wastewater backups. Therefore in 1999, in an effort to "assist property owners and/or tenants to reduce costs from damage caused by wastewater main backups", the City adopted the Voluntary Goodwill Policy (emphasis added). The City Manager extended the Wastewater Goodwill Policy to the February 16, 2007 water main break, and again to the July 31, 2010 South Black water main break. The City Manager also increased the $1,000/$2,000 cap for the South 15th Avenue water main break to $2,500/5,000 and has indicated he will do something similar in this case once the applications are submitted and we get a feel for the amount of damage claimed. Current Situation. On August 2, 2010, Director of Public Services Arkell sent a letter (copy attached) to property owners and residents in the area affected by the July 31, 2010 South Black water main break advising them to submit claims to the City's insurer, Montana Municipal Interlocal Authority (MMIA) and that if coverage was denied, the City would extend the Goodwill policy the incident. The letter included detailed instructions for submittal along with a copy of the policy. In addition to the letter, the City Manager, Public Services Director, and the Neighborhood Coordinator walked the affected area and hand delivered copies of the letter and Goodwill policy and answered questions. To determine whether private property losses would be covered under the City's liability policy, MMIA conducted an investigation into the main break. MMIA determined that the City was not negligent and "had no opportunity to warn of or remedy this event". As a result of their investigation MMIA denied coverage. On August 18, 2010, we sent a second letter (copy also attached) updating the residents on the investigation and again urging them to submit claims for assistance if they did not have insurance or their private insurance denied coverage. As we seek to assist property owners and residents, we continue to encourage anyone who experienced uninsured loss as a result of this incident to submit claims in accordance with the Goodwill Policy. The City Manager and Director of Public Services are reviewing each claim on a case-by-case basis and at the present time are making payments based on the particular circumstances of each case and per the Goodwill Policy. To date we have received nine claims from eight people, and we have paid a total of $5,588.47 for eight of those claims. One claim for $127.50 for "lost rent" was denied because the Goodwill Policy does not provide payment for inconvenience, lost revenue or similar items. One claimant did not include receipts or an estimate of the cost of damage and has been asked to submit the needed information. Three of the paid claims were for less than the $1,000 cap. One claim for $1,010.66 was paid in full. Three claims exceed the $1,000 cap ($1,349.98, $5,603.35 and $7,094.97), and each of those parties have been paid $1,000, with additional payment on-hold until after this meeting. We have spoken with two other property owners whose damage is reported to be approximately $8,000 to $10,000 each. These owners are assembling their claims and have indicated they will submit them as soon as their documentation is completed. 102 3 We are using this opportunity to investigate and inform the community about specific forms of insurance and riders that, based on their particular insurance company, may be available to provide insurance coverage for similar incidents. We will utilize the City's website, channel 20, and Neighborhoods program to disseminate this information as it becomes available. Future Insurance Coverage. The City is insured through MMIA. Currently, MMIA does not have a program that would provide this level of coverage, although they are discussing adding policy offerings for these types of events. The City could seek to purchase insurance through a private carrier that would cover resident and property owners under similar circumstances where the City was found not liable for the incident. The cost for this type of coverage has not yet been determined. As we have only had three such incidents in the past 34 years, it may make more sense to continue to fund these types of rare Goodwill Policy payments from the water fund on a case-by-case basis. Site Repair. As with all property damaged at the location of public infrastructure work, the Water Division repaired the public and private area at the site of the main break. The property owner has expressed thanks and appreciation for the repair of the damage. Site of July 31, 2010 Water Main Break. Photo taken within one hour of break. Note picket fence in upper right side of photo. 103 4 Site of July 31, 2010 Water Main Break. Water main is located between tree and Sidewalk. This photo was provided by the property owner and was taken in June 2005 Site of July 31, 2010 Water Main Break after city water division repaired area. 104 5 UNRESOLVED ISSUES: We currently have three Goodwill Policy claimants who have been paid the maximum the policy allows and we expect to receive at least two more claims over the $1,000 maximum. If the Commission provides direction for each claim to be reviewed on a case-by-case basis, the claimants will likely be provided additional compensation over the current $1,000 maximum. FISCAL EFFECTS: Prior to this incident, the City has made approximately $31,802 in total claims under the Goodwill policy ($31,845 in water, $2,957 in sewer). Goodwill payments are made from the affected enterprise fund. Claims for this incident will be paid by the city’s water utility fund. The water fund does not budget specifically for these types of claims, but does carry a budget for miscellaneous, unforeseen expenses. Depending on the amount paid as a result of this incident, and other miscellaneous expenses over the fiscal year, a budget adjustment may have to be made at the end of the year to balance the overall water operations budget. As discussed above, major water leaks that result in significant property damage are uncommon. We are continuing to research and evaluate options for coverage; however, we suspect insurance for these types of incidents is unnecessary and that we should continue to utilize the water and sewer funds to pay claims as they occur on a case-by-case basis. ALTERNATIVES: As suggested by the City Commission. Attachments: August 2, 2010 letter August 18, 2010 letter Report compiled on: September 2, 2010 105 August 2, 2010 RE: July 31, 2010 South Black Avenue Water Main Break Dear Resident/Property Owner: The City recognizes that you may have been affected by the July 31, 2010 water main break that occurred at the dead end of South Black Avenue, near Cleveland Street. This letter is being hand- delivered to properties within the affected area, and is also being mailed to property owners of record as well as to “current tenant” of the properties within the affected area. Thus, you may receive this same information twice. The city owns, operates and maintains an extensive system of water distribution mains, and for a variety of reasons these mains may occasionally break, leak or overflow into buildings, as occurred on July 31. In recognition that this water main break damage can be a hardship to property owners and/or tenants, the City Manager has extended the City’s Voluntary Goodwill Policy for wastewater backups to this water main incident. This policy has been extended to help you defray expenses related to this break, should insurance not cover the damage. The City’s insurance company is investigating this incident, and it is unknown at this time whether they will approve or deny claims. Because the investigation is underway, the City is neither accepting nor denying liability at this time. This information is being submitted to you so you can begin the process without delay. Per the Policy, you must first submit a claim to the city’s insurer for reimbursement. The city will provide monetary assistance only after our insurer denies the claim. You may file a claim with the City’s insurance company by calling Michelle at (406)582-3200, Ext. 4; Katherine at (406)582-2273; or Heather at (406)582-2314. If you have personal insurance, your insurance company must also deny your claim or only pay for a portion of the damage. Should you not have insurance coverage, you must submit an affidavit stating that you do not have insurance. If insurance coverage is denied, this policy will provide up to $1,000 per household. All tenants living in one rental unit are considered one household for that unit. In addition, property owners may be reimbursed up to $1,000 per building. The total payment cannot exceed $2,000 per unit. In the case of a 4-plex, the property owner could receive up to $1,000, and each of the four households (or commercial renters) could receive $1,000, for a total payment of $5,000 for that building. The owner of a single-household home who also occupies that home could receive up to $1,000. 106 South Black Avenue Water Main Break August 2, 2010 Page 2 Items that qualify for reimbursement include contracting of a cleaning service; cleaning equipment or supplies; emergency housing and meals; disposal of damaged material; actual cash value of improvements, fixtures, and personal property needing to be replaced or repaired; your personal property insurance deductible or expenses not covered by your personal insurance company. No payment will be made for personal pain and suffering, emotional or mental distress, inconvenience, airfare or travel expenses, lost wages, lost business revenues, lost business profits or similar items. Attached you will find a Goodwill Claim Form. This claim will only be processed if the City’s insurance company denies your claim. This form must be submitted within three (3) months of being denied by our insurance company. In that instance, your claim will be processed as quickly as possible. If you have questions regarding the form or policy, please call me at (406)582-2315 or (406)581-0091. I would also like to remind you that if you need to make electrical or structural repairs, including the replacement of sheetrock, you may need a building permit. Please contact the City’s Building Department at 582-2375 to determine whether a building permit is needed. Sincerely, Debra H. Arkell Director of Public Services Enc. Goodwill Policy Claim Form Cc: Chris Kukulski, City Manager 107 108 109