Submitted By: William E. Sexton, City Attorney
Presentation By: William E. Sexton, City Attorney
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Department: City Attorney
STAFF RECOMMENDATION (Motion Ready):
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Authorization to manage claims and/or settle pending claims associated with Hurricane Milton / Lift Station #11 damages claims, including the related expenditure of funds
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OCALA’S RELEVANT STRATEGIC GOALS:
Fiscally Sustainable
PROOF OF PUBLICATION:
N/A
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BACKGROUND:
On or about October 9, 2024, and resulting from a power outage that occurred during and ostensibly caused by the tropical cyclone identified as Hurricane Milton, the City’s Lift Station #11, located at or about 628 N.E. 27th Avenue, failed to operate which resulted in the backup of wastewater through sewer plumbing into - potentially - 10 duplex/apartment units and one commercial unit.
The intrusion of the wastewater into the units caused damage to flooring, drywall, cabinets, furniture, and other personal property of the affected parties and raised concerns over the continued occupation of the facilities by the affected parties.
Given the sensitivity of the situation following the Hurricane Milton natural disaster which occurred during a state of emergency in Marion County, Florida, as declared by the President of the United States, the Governor of the State of Florida, and the Board of County Commissioners of Marion County, Florida, it was our desire to provide as much support as possible to the affected parties as quickly as possible. Likewise, it was determined that these efforts only served to mitigate the risk of future, potential claims for damages by the affected parties.
Efforts were immediately undertaken to remediate the situation by offering the affected parties alternative housing in the form of access to an extended-stay hotel. Likewise, our staff and representatives of our third-party claims administrator (TPA) immediately began contacting vendors necessary to remediate and repair the damage to the units and to repair and/or replace the damaged contents and personal property of the affected parties. We made arrangements for portable storage facilities to be located at the affected properties to allow affected parties to remove unaffected contents from their units before and during the remediation and repairs.
Based upon a more detailed analysis of estimated costs for our ongoing efforts to provide relief to the affected parties, it has been determined that our continued efforts to remediate the situation may approach our maximum liability exposure pursuant to the sovereign immunity limits provided for in Section 768.28, Florida Statutes; which would exceed the $50,000 limit for staff-approved claims settlements provided for in Resolution 2019-10.
Therefore, staff recommends that Council authorize expenditures not to exceed the limits provided for in Section 768.28, Florida Statutes¸ ($200,000 per claim/$300,000 per incident) for the continued efforts on behalf of the City in furtherance of these claims, including specifically but not necessarily limited to the following:
• Temporary housing for affected parties;
• Removal of damaged and contaminated materials and personal property;
• Storage for personal property displaced from affected properties;
• Repair and reconstruction of damaged and contaminated materials, including but not necessarily limited to flooring, drywall, and cabinets; and
• Replacement of personal property which was damaged or destroyed.
While there is never a guarantee which incidents may result in future claims or even possibly litigation, it is staff’s opinion that the efforts outlined above and herein are the most appropriate steps to be taken to mitigate or eliminate our associated risk.
It is our position that the damages outlined above and herein were caused by the failure of Zabatt Engine Systems, Inc., an outside contractor engaged to install permanent backup generators at the City’s 20 lift stations, including the installation of the necessary transfer switches for the same. In short, we believe that during their work on Lift Station #11, the contractor disconnected the existing, temporary, portable backup generator at the facility to perform the electrical work associated with their project and failed to reconnect said existing temporary generator before leaving the site. The contractor’s negligence resulted in leaving Lift Station #11 without any mechanism for backup power in the event of a power outage. Our Risk Management staff and our TPA are actively seeking subrogation from this contractor and/or their insurance company.
Additionally, we are advised that the City’s general liability insurance carrier may provide coverage for the damages described above. Our staff is also actively working to pursue the necessary claims to take advantage of that coverage.
Notwithstanding these possible sources of compensation or reimbursement for the costs of these potential claims, staff determined that it was in the City’s best interest to provide support to the affected parties as quickly as possible in the aftermath of Hurricane Milton.
Finally, while the expenditures referenced above may not necessarily represent a “settlement” of claims, under certain circumstances, they may represent just that and pursuant to Resolution 2019-10 a potential discretionary settlement in an amount not to exceed $300,000, the City’s maximum liability under Section 768.28, Florida Statutes, requires approval of the City Council, based upon recommendations from the City Manager, the Human Resources & Risk Management Director, and the City Attorney, all of which are indicated by the signatures below.
FINDINGS AND CONCLUSIONS:
The City Council of the City of Ocala, Florida, finds, determines and concludes that the authorization to manage claims and/or settle pending claims associated with Hurricane Milton / Lift Station #11 damages claims, including the expenditure of funds:
• Provides a reasonable yet conservative, cost-effective resolution to the claims associated with damages incurred as a result of the Lift Station #11 failure during Hurricane Milton.
• Does not result in a significant impact on the finances of the City of Ocala, Florida;
• Demonstrates a public purpose, is intended to and does protect and promote the health, safety, and welfare of the citizens of the City of Ocala, Florida; and
• Is in the best interest of the City of Ocala, Florida, and its citizens.
FISCAL IMPACT:
There will be a fiscal impact associated with the expenditure of funds to manage and/or settle these claims, which will initially be paid from the City’s self-insurance fund, 626-099-999-590-81-45020. Any expenditure of funds will, however, be mediated by claims made (1) against the City’s outside contractor’s insurance policy; and (2) the City’s insurance coverage for matters such as this one.
PROCUREMENT REVIEW:
N/A
LEGAL REVIEW:
Approval of this matter has been reviewed, approved, and is recommended to City Council by William E. Sexton., City Attorney.
ALTERNATIVE:
• Approve with Changes
• Table
• Deny