2 Insurance Firms to Pay $4 Million to Westminster

Two insurance companies have agreed to pay Westminster $4 million to replace a water tank that ruptured last fall, injuring six people and causing millions of dollars of property damage.

“This is a major step of forward,” City Manager Don Vestal said. “The demolition of the tank a couple of weeks ago was a significant milestone. This settlement is another.”

The water tank on Hefley Square burst Sept. 21, unleashing 5 million gallons of water and leaving more than 30 families homeless. The cause was later determined to be a structural flaw in the tank.

The city filed a breach-of-contract suit in May against Lexington Insurance Co. of Boston and Commonwealth Insurance Co. of Vancouver, B.C.

Vestal said the settlement means the city is guaranteed the money without going through the uncertainties of a trial.

The city has paid more than $3 million in evacuation costs and emergency aid, which includes the cost of overtime and cleanup.

The total cost to the city from the rupture is estimated at $8 million to $10 million, said Jennifer Gaetano, a spokeswoman for the city.

Vestal, however, said the total figure depends on the outcome of lawsuits Hefley Square residents have filed against the city.

The city has received $1.65 million in aid from the Orange County Cities Risk Management Authority, a coalition of 11 cities that pool funds to insure each other, and $400,000 in state grants.

One remaining piece of the financial puzzle is the outcome of an application for federal assistance, but Vestal was hopeful that the city will receive an answer within two months.

The $4 million from Tuesday’s settlement is earmarked for repairs to the nearby fire station that was damaged in the flood and for a new water tank.

The city is reviewing three sites for a new tank, including one on Monroe Street occupied by a similar one that has been emptied to avoid a repeat of the September disaster.