West Virginia American Water Co. has reached a deal with one of its insurance carriers, a move that provides the water company an additional $22 million to cover the payments it has agreed to make to Kanawha Valley residents, businesses and workers in a class-action settlement over the January 2014 water crisis, court records and corporate disclosures show.
West Virginia American agreed to the settlement with Starr Indemnity and Liability to resolve a lawsuit the water company filed to try to force the insurance company to provide coverage for part of the $151 million water crisis settlement agreed to by West Virginia American and Eastman Chemical.
A disclosure filed last week with the U.S. Securities and Exchange Commission said that West Virginia American reached the deal with Starr on Sept. 19. Starr agreed to pay $22 million out of the $25 million maximum coverage in the policy, in exchange for a "full release" by West Virginia American Water, the SEC filing said.
Earlier this week, attorneys for the water company and Starr informed U.S. District Judge John T. Copenhaver Jr. of the settlement. The deal is contingent on final approval by Copenhaver of the class-action settlement in the water crisis case.
Last week, Copenhaver gave his preliminary approval to the water-crisis settlement, a deal aimed at compensating several hundred thousand victims of the water system contamination that followed the Jan. 9, 2014, chemical spill at Freedom Industries, located just upstream from West Virginia American's regional water intake on the Elk River.
The filing of claims in that class-action settlement will not start until Oct. 11, when online filing will be available and settlement notices will be mailed to class members, according to a notice on the website http://wvwaterlitigation.com/.
West Virginia American Water's share of the settlement payments is $126 million, with the other $25 million coming from Eastman Chemical.
Previously, West Virginia American had said in an SEC filing that the water company itself would contribute $65 million of the $126 million, with the rest coming from "certain of the company's general liability insurance carriers." The $22 million from Starr does not change the amount of the class-action settlement in the water crisis case, but does reduce from $65 million to $43 million the amount that West Virginia American itself has to pay, according to the disclosures.
In court documents, West Virginia American has said it is covered by a "tower" of insurance policies that kick in at various levels when underlying coverage is used up.
One policy, issued by Travelers Property Casualty, has limits of $1 million, and a second level policy, issued by AXA Insurance Co., has limits of $25 million. Starr's policy and another policy issued by XL Insurance Co. shares limits of $50 million, according to the water company's lawsuit against Starr. The suit also refers to other, "higher layer excess carriers" of insurance for West Virginia American.
West Virginia American has said that during settlement talks in the water crisis case, Travelers and AXA examined the lawsuits and "tendered their policy limits" -- a total of $26 million -- "in aid of reaching a settlement" of the class-actions claims.
In its latest SEC filing, West Virginia American said that it is continuing to "vigorously pursue" insurance coverage through mandatory arbitration with the last non-participating carrier.
Reach Ken Ward Jr. at kward@wvgazettemail.com, 304-348-1702 or follow @kenwardjr on Twitter.