The the Magnolia Wet Weather Storage Facility is located just east of Smith Cove Park near Elliott Bay.
The the Magnolia Wet Weather Storage Facility is located just east of Smith Cove Park near Elliott Bay.

King County is suing Ace American Insurance Company for more than $20 million in costs incurred from repairing an underground conveyance pipe at its south Magnolia wastewater storage facility due to a rejected insurance claim and subsequent snubbing for more than two years.

The county has a consent decree with the Environmental Protection Agency and Washington Department of Ecology to reduce stormwater and sewage overflows into Puget Sound.

King County’s South Magnolia Combined Sewer Overflow Control Project began construction in 2014, and involved running a 3,000-foot-long underground conveyance pipe from a diversion structure on 32nd Avenue West to the Magnolia Wet Weather Storage Facility just east of Smith Cove Park. The goal was keeping untreated wastewater out of Elliott Bay during stormwater surges.

The lawsuit, filed in U.S. District Court on Dec. 31, states the underground conveyance pipe was damaged when the head was pulled off during pull back around Dec. 19, 2014.

Contractor Walsh Construction Company had a builder’s risk policy with Ace American Insurance Company, which accepted the claim for the damage and remediation.

Not fully understood at that time was that portions of the 3,000-foot-long pipe had fractured.

On Sept. 19, 2016, several months after the system went online, King County engineers discovered the upper diversion station filled with wastewater that had not flowed down via gravity to the 1.5 million gallon storage tank near Smith Cove Park.

“Eventually, the County's investigation revealed that Underground Conveyance Pipe was plugged with soil and that significant chunks of broken pipe had been carried ‘downstream’ within the pipe and the County informed Walsh of the failed system, which was still under the Contractor's one year warranty,” the lawsuit states.

Walsh notified Ace of the loss on Nov. 22, and the Pittsburgh-based insurance company denied the contractor coverage for the damage three weeks later, according to the lawsuit, because ACE determined the loss had occurred after the Nov. 20, 2015 expiration of the builder’s risk policy and Dec. 22, 2015 substantial completion date.

Because King County’s investigation shows the damage to the underground conveyance pipe occurred during installation in 2014, it contends that the loss did occur while the policy was still active.

Walsh moved into restoration work last fall, after installing a new pipe in the existing pipe in May 2018. A King County Combined Sewer Overflow Annual Report found an average of 30 untreated overflows at the site in 2017.

King County’s contractor provided Ace with the results of the investigation on March 22, 2018, asking the insurance company to reconsider its 2016 denial of the claim, according to the lawsuit.

The county claims neither it nor Walsh was successful in soliciting a response from Ace American Insurance Company over several months, resulting in King County sending Ace notice on Dec. 6 that it would pursue a lawsuit.

“As a result of Ace's refusal to reconsider its denial of Walsh's tender under the Policy and honor the terms of its Policy and even undertake its duty to investigate,” the lawsuit states, “King County has directly incurred in excess of $20,000,000 in repair costs to the wastewater conveyance system in an effort to promptly bring the system back on line and fulfill its commitment under the Consent Decree.”

The lawsuit was filed after Ace did not respond to the county’s notice within the 20 days required under Washington’s Insurance Fair Conduct Act, according to the complaint.

King County is seeking reimbursement of the cost of the repairs, Consumer Protection Act damages and attorneys’ fees. The county is also seeking an award of treble damages, which would triple the amount Ace pays if a judge agrees.

The county has retained attorneys with the firm Lane Powell, which specializes in fiduciary litigation, to represent it in this civil suit.

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