TVA insurer pays out $42 million in ash spill

TVA insurer pays out $42 million in ash spill

October 12th, 2013 by Dave Flessner in Business Around the Region

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Nearly five years after one of its worst environmental disasters, the Tennessee Valley Authority recovered another $42 million this week to help pay for the more than $1 billion expense of cleaning up the 2008 ash spill at the Kingston Fossil Plant.

An arbitrator ruled that one of TVA's insurers, Bermuda-based insurer Arch, had to pay for part of the cleanup expenses from the collapse of a coal ash pond where TVA dumped coal residues for decades at its Kingston plant.

The arbitration award is the first of three pending cases between TVA and its insurers over the Kingston ash spill.

TVA now has collected $92 million from property and casualty insurance companies, and the agency could receive up to $200 million more, depending upon the outcome of pending arbitration cases.

TVA spokesman Duncan Mansfield said TVA is seeking the policy limits of $150 million from ACE Bermuda and another $50 million from Zurich insurance.

Even if successful, TVA still will get back only about a fourth of what the utility expects to spend to repair and clean up the river and surrounding property damaged when an ash dike ruptured at an 84-acre solid waste containment area in Roane County, Tenn., three days before Christmas in 2008.

The ruptured dike spilled 1.1 billion gallons of coal fly ash slurry into the Emory River and its Swan Pond embayment, and covered nearly 300 acres of nearby property.

TVA has spent $1.013 billion on the Kingston cleanup so far and expects eventually to spend a total of about $1.1 billion on the cleanup when the project is complete by 2015.

TVA is paying for the cost of the cleanup over 15 years, stretching until 2024.

Mansfield said TVA is pleased with the arbitrator's ruling that requires Arch to pay some of the cleanup expenses.

TVA had sought $50 million from Arch, but the insurer argued in its rescission letter that TVA made a material misrepresentation on the application for insurance by not properly labeling the elevated ash pond as a dam.

"They claimed that this dredge cell was a dam and they asked us for a list of dams and it wasn't included on that list," said Leon Kellner, a senior partner in the Insurance Recovery Group of Perkins Coie, who represented TVA. "This was not a dam when we filled out the application and the question did not call for ash bonds like the Kingston facility. ... In my opinion we showed them that their claim was baseless."

Kellner, a former prosecutor, said the insurance cases with TVA are unique because as a federal agency TVA is releasing information about the arbitrator's decision.

"Everything should be transparent," Kellner said.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340