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West Point repair costs fall below insurance coverage limits; work to be complete in 2017

Summary

Costs to repair damage incurred by flooding inside King County’s West Point Treatment Plant are expected to be covered by insurance, with full restoration work scheduled for completion by the end of 2017. A cost estimate prepared by engineering firm CH2M, which puts total restoration costs at $49 to $57 million, includes risk allowances related to unknown equipment replacement costs and other factors.

Story

Restoration costs at King County’s West Point Treatment Plant will fall below property insurance policy coverage limits and pose no impact to King County wholesale sewer rates in 2017-18. 

West Point sustained severe damage on Feb. 9, 2017, when equipment failure and high flows led to flooding inside the plant that temporarily hampered its treatment capacity and capabilities.

A cost estimate prepared by engineering firm CH2M puts total losses at $49 to $57 million including risk allowances to account for uncertainties such as building code changes and unknown costs of highly-specialized parts and equipment. 

CH2M developed the cost estimate using information from multiple sources, including existing purchase orders for related equipment, work orders, staff labor charges, and asset inventories. West Point’s repair and replacement costs are expected to be covered by insurance minus a $250,000 deductible.

King County carries a total of $500 million in property insurance coverage for its wastewater treatment infrastructure, with a $250 million sub-limit for flood-related damage.

King County’s insurance coverage takes effect through tiered levels based on the amount and type of damage outlined in the policy. FM Global is the primary insurer that covers damages for the first $25 million. McLarens Global Claim Services is the claims team that is representing the excess insurance carriers on this loss. 

The excess carriers, which provide $75 million in property insurance in addition to the primary $25 million on a quota share program, include Lexington/AIG, Berkshire, AWAC, Lloyds of London, AXIS, Starr, and Ironshore. FM Global provides an additional $400 million excess this $100 million for a total of $500 million in property insurance limits. 

Insurance is not expected to cover potential regulatory fines or additional environmental monitoring, but it will likely pay for loss-related expenses such as solids trucking and staff time. It is not currently known whether the claim will affect future insurance policy rates. 

All critical systems and process units were repaired or rehabilitated by April 27 and the treatment plant resumed compliance with its environmental permits on May 11. A long term repair plan is underway to complete full restoration at the plant by the end of 2017.

An emergency waiver is in place to expedite completion of repairs, which allows King County’s Wastewater Treatment Division to hire consultants and contractors directly and avoid lengthy procurement processes. The division is working to ensure other procurement policies are used such as compliance with labor rates, competitive pricing and use of small contractors and suppliers.

The King County Council has hired an independent third party review and directed the Wastewater Treatment Division to conduct additional reviews of its asset management programs and future needs for West Point. Recommendations from these assessments may not be covered by insurance but will go through a thorough approval process before being implemented. 

Additional information on West Point’s restoration is online. For ongoing updates on water quality, please visit the West Point Marine Water Quality Monitoring information page.