Westminster Sues 2 Insurers Over Water Tank Rupture

Westminster filed an $8-million lawsuit Friday against two insurance companies that refused to pay for demolishing and replacing a water tank that ruptured last fall, injuring six people and displacing more than 30 families.

The breach-of-contract suit filed in Orange County Superior Court cites Lexington Insurance Co. of Boston and Commonwealth Insurance Co. of Vancouver, B.C., for refusing to cover the city’s costs.

“We feel like we have no choice but to go to court,” City Manager Don Vestal said.

The Sept. 21 rupture flooded out the 49-unit Hefley Square condominium complex and a nearby fire station. It was found to be caused by design and construction flaws in the 5-million-gallon tank.

The two insurers denied the city’s claim for the damaged tank because of a clause in the policy that excludes losses caused by construction or design defects, said the insurers’ attorney, James Wraith of Oakland.

The companies have offered to pay for damage to the fire station, however, because the policy covers “ensuing losses” caused by those defects.

“We’re confident we’re right,” Wraith said.

The city argues that the damage to the tank itself should also be considered an ensuing loss.

The rupture and its aftermath have cost the city at least $2.8 million in staff time, repairs and payments to homeowners who filed claims against Westminster. Eleven families whose dwellings were condemned as uninhabitable are still being housed by the city as a contractor rebuilds their homes.

A county insurance authority that covers the city for private property damaged in the flood already has paid Westminster $1.6 million.

The city has a second, undamaged tank on Monroe Street with an identical design. That tank has been emptied, and officials are still debating what to do with it.