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Home My WebLink About03 04 2019 Green Heights Trail Water Main Break Report and Presentation Phone 952.447.9800 / Fax 952.447.4245 / www.cityofpriorlake.com 4646 Dakota Street SE Prior Lake, MN 55372 CITY COUNCIL WORK SESSION REPORT MEETING DATE: MARCH 4, 2019 AGENDA #: 1B PREPARED BY: MICHAEL PLANTE, CITY MANAGER PRESENTED BY: MICHAEL PLANTE, CITY MANAGER AGENDA ITEM: GREEN HEIGHTS TRAIL WATER MAIN BREAK AND CITY RESPONSE INTRODUCTION: On February 3, 2019, a water main on Green Heights Trail broke. After the break, the water broke through the street and flowed down a hill to a sanitary sewer lift station at the bottom of the hill. The pumps were not able to keep up with the amount of water flowing into the station which caused water in the sanitary sewer system to backup into the basements of four homes in the area. TOPIC: Since the break occurred City staff has been in contact with the League of Minnesota Cities Insurance Trust (“the League”) to provide as much information as possible so that the League could make an informed decision. Unfortunately, the League determined that the claims related to the breakage were not covered events due to the finding that the City did not act in a negligent manner. What that determination means is that the impacted residents do not have coverage under the City’s insurance policy. Additionally, it is unlikely that the majority of the impacted residents would have coverage under their individual homeowner’s insurance policies as a sewage backup typically requires a separate insurance rider that most homeowners do not have in place. Since the breakage and notification from the League that the claims would not be covered City staff has worked to both try and address this situation while also planning for the future. Part of that process included having a discussion during the February 19, 2019 Council Work Session. Based off feedback from that discussion City staff has secured having a representative present from the League to discuss and answer questions related to “no fault” insurance that the League offers. Additionally, different approaches have been sought to try and identify a way to respond to the damages from the breakage. Included in that review was looking into the feasibility of utilizing the City’s sewer and water enterprise funds to address the damages that were incurred and to potentially fund “no fault” insurance coverage from the League moving forward should the Council wish to pursue such a policy. Utility funds could be utilized to fund potential expenses related to the breakage as well as to fund coverage for the “no fault” insurance moving 2 forward. However, in the short term those funds would have to be advanced from the City and be factored in to the 2020 utility rates. If this is a concept that the Council would be in support of pursuing the timing is somewhat fortuitous as it is envisioned that the City would be undertaking a utility rate study this year. If this concept is supported, it would be recommended that this situation be handled in a manner that would be consistent with the insurance coverage moving forward. LMCIT No-Fault Sewer Backup and Water Main Break Coverage Sewer Backup Coverages 1.Standard Coverage –legally liable/negligence claims •Standard feature of LMCIT liability coverage •$2 million per occurrence coverage limit •No specific exclusions arising out of sewer backups for which the city is negligent in causing •A mandatory $2,500 deductible applies •Incentive program available (deductible savings program) Sewer Incentive Program Prior Lake has qualified since 11/9/2016 •Municipal liability deductible is $25,000/$50,000/$1,000 •If $50,000 aggregate limit is exceeded, sewer losses are subject to the $1,000 maintenance deductible •If the City did not qualify for this incentive program and the $50,000 aggregate limit is exceeded, sewer losses would be subject to the $2,500 minimum deductible Prior Lake Sewer Claim History –10 Years Year Claim # Amount Accident Description 2009 11070405 $1,234 2009 11070405 $1,711 2009 11070405 $1,123 2009 11070405 $19,909 2009 11070405 $9,849 2009 11070754 $9,802 2009 11070754 $1,796 2014 C0032250 $3,188 Sewer Backup due to lift station malfunction 2015 C0038620 $2,995 Sewer backup due to blockage in city main; maintenance related 2017 43326 $2,157 Sewer backup during the city's work on the Franklin Trail SE Street Improvement project 2017 48004 $9,230 2017 48004 $7,250 Sewer backups due to hydrant flushing being discharged into sanitary line. Sewer backup due to unknown blockage in main. Sewer backed up into claimant's basement due to root intrusion from service laterals. LMCIT Claim History No-Fault Sewer and Water Main Break Coverage 2. No-Fault Sewer Backup Coverage •Provides coverage to property owners irrespective of whether the backup was caused by city negligence •Residents’ homeowners insurance is primary •City must qualify for coverage Sewer Backup Coverages 93 of LMCIT’s 1206 members purchase No-Fault Sewer Backup Coverage (~8%) Population NFSB Participation 0-2,500 59 Members (64%) 2,501-25,000 29 Members (31%) Greater than 25,000 5 Members (5%) No-Fault Sewer Backup Coverage (NFSB) •Exclusions do apply •Any event where FEMA assistance is available •Interruption in city electric supply is more than 72 hours •A 100 year rainfall as determined by the National Weather Service •Limits available •$10,000, $25,000 and $40,000 •Limit for NFSB coverage is per building per year, regardless of the number of occurrences or the number of claimants •Limit for water main break coverage is per claimant No-Fault Sewer Backup Coverage (NFSB) -Premium •Per-connection cost •Deductible •Large deductible credit will apply, if any •Experience rating component •No losses –10% credit •Loss frequency higher than program average –10% debit •Frequency average is roughly 1 sewer loss per 9,000 sewer connections •Prior Lake has 8,811 sewer connections No Fault Sewer Backup Coverage (NFSB) -Premium •Charge is in addition to the municipal liability premium associated with the sewer connection exposure ($12,170) Estimated annual premium Limit $ 9,000 10,000$ $ 10,500 25,000$ $ 13,000 40,000$ LMCIT Claim History NFSB Deductible •Coverage is provided by endorsement to the municipal liability coverage •Municipal liability deductible applies for NFSB •$25,000/$50,000/$1,000 •No-Fault coverage counts toward the aggregate deductible Advantages of NFSB Coverage • Give cities a way to address the sticky political problems that can arise when a property owner learns the city and LMCIT won’t reimburse for sewer backup damages because the city wasn’t negligent and therefore not legally liable. •LMCIT will provide claim adjusting assistance Policy Decision City would be agreeing to fund costs it’s not otherwise legally obligated to pay •Some find it worth the cost •Some do not