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HomeMy WebLinkAbout2005 11 07 Regular 500 SPECIAL- MEETING_Sewer _Damage_Determination November 7, 2005 Page 1 of 10 SPECIAL MEETING ITEM 500 CONSENT INFORMATIONAL PUBLIC HEARING REGULAR X November, 7, 2005 Meeting MGR /W IDEPT Authorization REQUEST: The City Manager requests the City Commission to make a final determination regarding the settlement of storm related damages resulting from sewer system back ups in homes during Hurricane Charley. PURPOSE: This agenda item is needed to bring closure to the city's final position regarding the restoration of properties damaged by sewer system back up associated with Hurricane Charley. CONSIDERATIONS: At approximately llPM on Friday, August 13, 2004 Hurricane Charley passed through Winter Springs resulting in power outages throughout the city, including the city's emergency communications system, and sewer lift stations. The City Hall emergency power generator came on as designed to provide power to the emergency communications system. Sewer collection systems field personnel began pumping sewer lift stations with three portable generators according to emergency plans. On Saturday, August 14th at approximately 2PM the City Hall emergency generator failed shutting down power and communications to the City Hall fire station and effectively putting it out of service, and shutting power to emergency communications equipment providing communication links between city, county and state emergency operations centers. In order to restore power to the City Hall fire station and emergency communications systems, one of the three sewer lift station portable generators had to be removed from the sewer system and transferred to City Hall, leaving the sewer system one generator short. City emergency operation procedures are designed to replicate the designed pumping sequence and to maintain pumping time cycles at acceptable levels. At approximately 2AM, on Sunday August 15, 2004, sewer field crews pumped down lift station ll-E, which feeds sewer lift station 7-E, consistent with the design sequence of the system. Shortly thereafter sewer back ups were experienced in 10 homes served by pump station 7E. SPECIAL- MEETING_Sewer_Damage_Determination November 7, 2005 Page 2 of 10 A post event analysis demonstrated that two factors likely contributed to the back ups as follows: 1. During the evening hours of August 14, 2004, and prior to the back ups there was an unusual surge in sewer flows of the sewer collection system. 2. Although the sewer fields crews were able to replicate the design sequence of pumping, due to the loss of the portable generator that was transferred to City Hall to replace the failed generator they could not replicate the design time cycle for pumping. As a result, the time between pumping was extended. Relatedly, the volume of sewer backing up in the lines was greater than that usually experienced during normal conditions. Therefore, when the crews began pumping lift station 11- E into 7- E they did not realize that this line section was already at, or near capacity. In conclusion, the combination of unusual flow surges prior to pumping, and extended pumping cycles caused by inadequate generators resulted in that section of the line being at, or near capacity when field crews began, without knowledge of those conditions, pumping additional sewage into that section of the sewer line. This resulted in that section of the sewer system unknowingly being operated over capacity, and causing the excess flow to flow into the effected homes. In light of this incident, subsequent remedial measures have been taken by the city, and that section of the line has been subsequently redesigned and constructed so that the flows are routed to a different part of the sewer system. The following homes experienced sewage back up. Almeida Bibiloni Baker Camarano German Mize Rutherford Schollhammer Smith Walters 1106 Superior Drive 1622 Woodduck Drive 1620 Woodduck Drive 1609 Little Sparrow Court 1608 Little Sparrow Court 1607 Little Sparrow Court 1634 Winter Springs Boulevard 1104 Superior Court 1612 White Dove Court 1605 Little Sparrow Court On August 23, 2004 the City Commission reviewed the incident with effected residents, city staff, and the city's insurance carrier, and instructed the staff to expedite providing the residents with emergency help, and fully restoring their property. Subsequently, the city insurance carrier and the staff have followed through on the direction of the Commission. The staff and insurance carrier conducted three progress meetings with the residents. Restoration activities going far beyond the minimum requirements of the city's insurance policy were expedited to address the needs of the residents. Except for three residents who are covered by their own insurance carriers, the insurance carrier has completed its offer of settlement to all residents. In cases involving personal carriers there are remaining subrogation issues that have to be worked out between the resident's insurance carrier and the city's insurance carrier. SPECIAL-MEETING_Sewer _Damage_Determination November 7, 2005 Page 3 of 10 Based upon information provided by the city's insurance carrier, claims paid to date by the city's and personal insurance carriers are as follows: Almeida Bibiloni Baker Camarano German * Mize Rutherford Schollhammer Smith Walters 1106 Superior Drive 1622 W oodduck Drive 1620 Woodduck Drive 1609 Little Sparrow Court 1608 Little Sparrow Court 1607 Little Sparrow Court 1634 Winter Springs Blvd. 1104 Superior Court 1612 White Dove Court 1605 Little Sparrow Court $43,207.03- City Carrier $60,661.31- City Carrier $29,510.51- City Carrier $149,416.29 - Pending with Personal Carrier $24,072.99- City Carrier $45,780.67-City Carrier, $10,000 Personal Carrier $114,656.82- City Carrier $777.66- City Carrier Unknown-Pending with Personal Carrier $33,133.46 - Personal Carrier According to the city's insurance carrier the Mize's were paid $10,000 by personal insurance carrier associated with sewer back up rider in their insurance policy. The Mize's refuse to disclose loss items covered by payment, creating a situation where the Mize's could "double-dip" and be paid by their insurance carrier and the city for the same loss item. * Although the city insurance carrier has made its final offers to the residents, several of the residents believe that they are entitled to additional compensation from the city. Therefore, the City Commission must decide the following: 1. Should any of the residents be provided any additional compensation? 2. If so, how much? There are three issues as follows: lA. Out-or-Pocket Expenses. The city's insurance policy provides for restoration of the property to the condition of the property immediately prior to the loss. It does not pay full replacement cost. This means that the insurance company is obligated only to pay the depreciated value for items which sustain normal wear, such as carpets and paint, etc. However, it is important to note that the city's insurance carrier at the request of the city has been very lenient in the application of normally accepted depreciation schedules to the resident's property. In this case the following depreciation was deducted from the eligible payments by the city's . . Insurance carner. Almeida Bibiloni Baker Camarano German Mize Rutherford Schollhammer Smith Walters 1106 Superior Drive 1622 Woodduck Drive 1620 Woodduck Drive 1609 Little Sparrow Court 1608 Little Sparrow Court 1607 Little Sparrow Court 1634 Winter Springs Blvd. 1104 Superior Court 1612 White Dove Court 1605 Little Sparrow Court Settled- City Carrier $967.65- City Carrier Settled- City Carrier Pending-Personal Carrier Settled- City Carrier $2,606.19- City Carrier $753.77- City Carrier Settled- City Carrier Pending-Personal Carrier Settled-Personal Carrier SPECIAL-MEETING_Sewer _Damage_Determination November 7, 2005 Page 4 of 10 lB. Out-Of-Pocket Expenses - Other The city's insurance policy provides for reasonable out-of-pocket expenses directly related to the incident such as food and lodging. In this case the residents are requesting the city to compensate them for the following out-of-pocket expenses rejected by the insurance carrier. Almeida Bibiloni Baker Camarano German *Mize Rutherford Schollhammer Smith Walters * 1106 Superior Drive Settled- City Carrier 1622 W oodduck Drive $38,442.27 - City Carrier 1620 Woodduck Drive Settled- City Carrier 1609 Little Sparrow Court Pending-Personal Carrier 1608 Little Sparrow Court $2,010.50- City Carrier 1607 Little Sparrow Court $13, 192.50-City/Personal Carrier 1634 Winter Springs Boulevard $950.35- City Carrier 1104 Superior Court Settled-City Carrier 1612 White Dove Court Settled-Personal Carrier 1605 Little Sparrow Court $950.35 According to the city's insurance carrier the Mize's were paid $10,000 by personal insurance carrier associated with sewer back up rider in their insurance policy. The Mize's refuse to disclose loss items covered by payment, creating a situation where the Mize's could "double dip" and be paid by their insurance carrier and the city for the same loss items. For Additional Information on this Section, see Table II. 2. Restoration vs. Diminution of Value. According to the city's insurance carrier, the law and normal practice provides for either restoration of damaged property or compensation for the diminished value of the property. In the case of restoration, property damage and reasonable out-of-pocket expenses, including hotels to live in while repairs are being made, are paid or reimbursed to the claimant. Alternatively, in the diminution of value option the insurance company writes the claimant a check for the reduction in the value of the property caused by damages to the property, and lets the claimant decide what he or she wants to do with the money. Additionally, it is important to note that diminution is a speculative condition; the extent of which can only be determined after the sale of property. According to the city's insurance carrier there is considerable opinion that a property with a certified hygienist certification declaring a home to be free of contamination is a value added instrument in favor of the value of a property in the market place. In this case subjecting rate payers of the utility and tax payers of the city to the cost of restoration of property and diminution of the property based upon some speculative loss of value in the market place appears to be highly speculative and an unsupported use of public funds. SPECIAL- MEETING_Sewer _Damage_Determination November 7, 2005 Page 5 of 10 In this case the following residents have taken the highly unusual and unsupportable position that they are entitled to both restoration and the following diminution of value: Almeida Bibiloni Baker Camarano German Mize Rutherford Schollhammer Smith Walters 3. Pain and Sufferin2. 1106 Superior Drive 1622 Woodduck Drive 1620 Woodduck Drive 1609 Little Sparrow Court 1608 Little Sparrow Court 1607 Little Sparrow Court 1634 Winter Springs Blvd. 1104 Superior Court 1612 White Dove Court 1605 Little Sparrow Court No Claims to Date $41,000 No Claims to Date Reservation of Rights $79,000 $74,900 $139,000 No claims to Date No Claims to Date $32,157 - $40,196 According to the city's insurance carrier, the law and normal practices do not provide compensation for sickness, and pain and suffering unless there is a factual determination of physical sickness or injury. In this case all factually determined cases of sickness and injury have been paid. Therefore, no additional compensation or reimbursement of medical costs are due. However, the effected residents are requesting the city to compensate them for pain and suffering in addition to that factually determined. These claims have been rejected by the city's insurance carrier because they have not been substantiated. Almeida Bibiloni Baker Camarano German Mize Rutherford Schollhammer Smith Walters 1106 Superior Drive 1622 Woodduck Drive 1620 Woodduck Drive 1609 Little Sparrow Court 1608 Little Sparrow Court 1607 Little Sparrow Court 1634 Winter Springs Blvd. 1104 Superior Court 1612 White Dove Court 1605 Little Sparrow Court No Claims To Date $15,000 No Claims To Date Reservation of Rights $15,000 $15,000 $50,000 No Claims To Date No Claims To Date No Claims To Date On September 12, 2005 the City Manager and City Attorney met with Attorney Anna Long representing four of the property owners; the Rutherford's, Mize's, German's, and Bibiloni's for purposes of discussing a settlement. At this meeting Attorney Long requested a settlement for her clients in the following amount in addition to payments made by the insurance company. Mize German Rutherford Bibiloni $104,620.00 96,010.00 189,950.00 100,000.00 SPECIAL- MEETING_Sewer_Damage_Determination November 7, 2005 Page 6 of 10 The City Manager offered to recommend to the City Commission that the city pay all persons effected in the incident out-of-pocket depreciation, plus $5,000 as a good will gesture for the inconveniences caused by the incident, in addition to the payments made by the city's insurance company as follows: Mize German Rutherford Bibiloni $7,606.19 5,000.00 5,753.77 5,967.65 On September 16, 2005 the City Manager received a letter from Attorney Long presenting a counter offer for her clients as follows: Mize German Rutherford Bibiloni $92,120.00 83,510.00 177,450.35 97,500.00 This counter offer was rejected and the matter scheduled for final review by the Commission on November 7,2005. COMMISSION ROLES OF RESPONSIBILITY Based upon these additional claims over and above those already addressed by the city's insurance carrier, there are two roles to be performed by the Commission because of the distinct proprietary and governmental functions of the city as follows: 1. Board of Directors of the Utility Department-The Proprietary Role. The operation of the city's utility system is a proprietary function of the city. In this proprietary role, the Commission has to make a business decision based upon what is best for the rate payers of the utility system. This role assumes the claimants are entitled to the minimum provided by law, so as to minimize the impact that their claims could have on the rate payers of the city's utility system. 2. City Commission-The Governmental Role. The City Commission is the governing body of the city and exercises governmental powers in the best interests of the citizens and taxpayers of Winter Springs. In this governmental role, the Commission has "equitable" powers to determine where justice lies in deciding what is in the overall best interest of the public. This role assumes that additional measures may be required over and beyond the minimum requirements of law in order to reach a just settlement in a matter of the public interest. In review of the facts of this matter from both a proprietary and governmental perspective, the Commission will need to decide the following: 1. Whether just compensation is the same in both roles. 2. Whether just compensation is different in the two roles, and that a just settlement requires a blended solution. SPECIAL- MEETING_Sewer_Damage_Determination November 7, 2005 Page 7 of 10 From the Proprietarv Role Perspective it appears that the insurance carrier has gone beyond the terms of the insurance policy to compensate the claimants for their damages. Therefore, no further action is required because the rate payers of the utility system have paid their fair share of the claims. From the Governmental Role Perspective the Commission may want to consider whether equity requires that the claimants receive additional compensation as follows: 1. Out-or-Pocket Covera2e. The Commission may want to consider taking the position that all out-of-pocket expenses required to restore the property not covered by either the city's policy or the homeowners policy should be paid from the city. In this case, the city would pay the depreciation cost not paid by the city's insurance and the resident's insurance. This payment would be made only upon the residents signing a full release from any and all further possible claims involving this incident. 2. Inconvenience. The Commission may want to consider a small payment to all the parties for the inconvenience this matter has caused them as a matter of good will. This payment would be made only upon the residents signing a full release from any and all further possible claims involving this incident. 3. Other Claims. Other than depreciation and inconvenience considerations, in no case should the City Commission consider a proposal for any additional repairs, diminution of value, pain and suffering, loss of income, or any other claims of damages over and beyond those recommended by the insurance company. It would be highly unproductive for the Commission to get involved in settling disputes over the value of such items as damaged chairs and carpet. Furthermore, it would be highly inadvisable, at this point, for the Commission to question the eligibility of claims based on the extensive review conducted by the city's insurance carrier. Your insurance company has highly competent people to carry out these functions on your behalf. 4. Other Recourses. According to the insurance company, the residents are free to pursue what ever legal rights they may have if they disagree with the claims paid to-date. However, to-date, the city's insurance carrier has compensated the residents an amount that has already exceeded the city's Sovereign Immunity Cap. Their right to any additional compensation for any tort claim would first have to be determined in a court, and then awarded through a Legislative Claims Bill Proceeding of the Florida Legislature. According to the city's insurance carrier, claims bills are rarely given and usually only in cases where the Legislature finds that the local government has been arbitrary and capricious in the handling of the matter. However, if a claims bill were approved by the Legislature, the city's insurance carrier will pay the amount of the awarded claims bill up to the $2,000,000 limits of the city's general liability policy. SPECIAL-MEETING_Sewer_Damage_Determination November 7, 2005 Page 8 of 10 According to your insurance carrier, the facts in this matter including the cause of the damage, the manner in which the city has addressed this matter, and the liberal reimbursements and cost assumed by the insurance carrier, it is highly unlikely that the residents can prove that they are entitled to compensation for any additional damages. 5. Who Pays? It is easy to say the "city" pays. In reality, the rate payers of the utility and the taxpayers of Winter Springs pay in three alternative forms as follows: 1. Through insurance coverage through the city's insurance carrier paid from premiums. 2. Through any additional relief the city would offer in cash. 3. In the case of a claims bill award, the insurance carrier would pay the additional cost resulting from the claims bill award up to limits of the policy as addressed in Number 4 above. Unfortunately, governments are too often seen as deep pockets in damage claims. The rapidly increasing cost of insurance premiums and cash outlays consumed in damage awards and settlements demands that city policy makers be fair but firm in the administration of these type matters to insure that taxpayers and rate payers are not subjected to the cost of excessive awards and settlements. PROCESS: The Commission has three alternatives by which to address this issue as follows: 1. Employ an Independent Hearing Officer to review the resident's claims and issue a written recommendation which sets forth findings of fact, conclusions of law, and proposed compensation relative to each claimant. The City Commission would make its final determination on this matter based upon the recommendation of the Hearing Officer's report at a future Commission meeting. 2. Make a final offer at the November 7, 2005 Special Meeting based upon the information presented at the meeting. 3. Delay the final decision to a future date to provide staff any additional information the Commission may deem necessary for a final determination. OPTIONS: If the Commission chooses to make a final determination at the November 7, 2005 Special Meeting the following options are recommended for consideration: SPECIAL-MEETING_Sewer _Damage_Determination November 7,2005 Page 9 of 10 Option I. Provide no additional compensation over and beyond that already provided for by the city and residents insurance carriers. This would be a legitimate and reasonable decision balancing the interest of the effected parties, the interest of the rate payers of the utility system, and the best interest of the public. Option II City pays depreciation cost taken by the city's insurance in return for a full release from future claims. This would be a reasonable offer. However, if it is done for one it should be done for all. Again, this offer would be made in return for a full release of any and all future claims arising out of this incident. Option III. City pays out-of-pocket cost not covered by the city or the residents' insurance carriers. This option is not recommended due to the conflicting opinions of the insurance carriers and the residents as to what constitutes a legitimate out-of-pocket expense. As stated before, the insurance carrier is the city's professional agent for determining legitimate losses and the City Commission would be ill advised to attempt to substitute the insurance company's judgment with its own. Option IV. City pays diminution of property value and pain and suffering. Again, according to the city's insurance carrier, these are not legitimate claims and should not be compensated by the city. Option V. City pays a small payment to each party for the inconvenience caused by this matter as a gesture of good will in return for a full release of claims. This would be an acceptable gesture provided that the amount was small, evenly paid to all parties, and in no way associated with any claim or damage. Option VI. City pays depreciation cost, and a minimum payment for inconvenience as a matter of good will in return for a full release from future claims. Again, this appears to be a reasonable gesture of good will on the part of the city in order to settle the matter. SPECIAL- MEETING_Sewer_Damage_Determination November 7,2005 Page 10 of 10 Option VII. Employ an Independent Hearing Officer to review the resident's claims and issue a recommendation which sets forth findings of fact, conclusions of law, and proposed compensation relative to each claimant. RECOMMENDATION: Based upon information provided to date by the effected parties, and the city's insurance carrier it is recommended that the Commission take one of the following actions: (1) Make a final offer as provided in Option VI above, or (2) Submit the issue to a Hearing Officer as provided in Option VII above. ATT ACHMENTS: September 15, 2005 Attorney Letter on behalf of the Claimants September 12, 2005 City Manager Letter October 19, 2004 League of Cities Attorney Letter COMMISSION ACTION: oo~ ~~ ~~ <= ~< oo~ <JJ l-< ~ Q) l-< l-< l-< ...... 0 Q) Q) Q) Q) ....... ....... ....... ....... <JJ <JJ ...... "'0 "'0 "'0 "'0 S c;:l "'0 "'0 ~ ~ ~ ...... ...... Q) Q) Q) Q) Q) i:J Q) Q) Q) Q) Q) ...t::: ~ - - - ...... ~ c;:l - - - ...... ...... OJ) ...... ...... ...... c;:l t:a Q) ...... ...... ...... c;:l c;:l u u u C2 C2 ...... ...... ...... Cl Cl l-< ...... ...... ...... Cl Cl .... Q) Q) Q) Q) Q) p.., S Q) Q) Q) Q) Q) - - - = CIl CIl CIl ....... 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'61l ~ .... - ~ "l:l ~ 0 V) V) - ~ ~ ~ ~ ~ <t: ~ 0 0 0 ~ 0 V) z V) ~ '\0 0\ ~ V1- V1- V1- ~ :::: ~ t:: 0 ~ ~ 0 .~ 0. ..... Q) "3 0 ~ r/J -< ~ "a :::: == 00. 0 ~ r/J U ~ .- ~ ~ <:>l - ~ == ~ ~ 0 ~ on ~ ~ ~ <t: ~ == ~ -< ~ U ~ ~ 00. 00. M =-- N ...... o N OJ OJ) '" Il. IL -1 Lowndes Drosdick Dosterf~ Kantor~ Reed, PA. RECEIVED SEP 1 6 2005 CITY OF WINTER SPRJNGS J City Manager .... ANNA H. LONG DIRECT DIAL: 407-418-6226 NORTH EOLA DRIVE OFFICE POST OFFICE Box 2809 ORLANDO, FLORIDA 32802-2809 anna.long@lowndes-law.com A T TOR N E Y S A T LAW ~ liT MERITAS LAW FIRMS WORLDWIDE September 15,2005 Mr. Ronald W. McLemore City Manager City of Winter Springs 1126 E. State Road 434 Winter Springs, FL 32708-2799 Re: Winter Springs Sewage Overflow Dear Mr. McLemore: As we discussed during our meeting, Monday, September 12, 2005, and as was detailed in your summary letter dated the same, the Rutherfords, Mizes, Germans and Biblionis (hereinafter the "Parties"), have submitted detailed claim spread sheets to your attention regarding the costs that they have incurred and have yet to incur, as the result of the City's discharge of raw sewage into their homes in August 2004. While the eity's Insurance Carrier has made partial payments to the parties to offset certain claims and damages sustained, the Parties maintain that they have not been made whole, as the City officials and representatives have continuously promised that they would be. As a result, it was the understanding of the Parties, that as the City Manager, you would be reviewing the information which they submitted in May 2005, and after that time would be recommending to the City Mayor and Commissioners cost reimbursement amounts for those claims (either in part or in whole), above and beyond that provided for by the Insurance Carrier. During our meeting and again in your letter, you stated that you would be willing to recommend to the City Mayor and the City Commissioners, that the City cover the depreciation costs of personal property not covered by the Insurance Carrier, as well as a "Good Will" amount, across the board of $5,000.00 for each of the effected parties, including those not specifically named herein. I presented your letter and the offer contained therein to the Parties during a meeting last night to discuss the same. Given the extent and the length of time to which the Parties, their families, their homes and property was effected, and continues to be to one degree or another, the $5000.00 offer was insulting to 0059909\112350\880599\1 215 NORTH EOLA DRIVE ORLANDO, FLORIDA 32801-2028 TEL: 407-843-4600. FAX:407-843-4444 . www.lowndes-Iaw.com 450 SOUTH ORANGE A VENUE, SUITE 800 ORLANDO, FLORIDA 32801-3344 McLemore September 15, 2005 Page 2 everyone of them. The documentation available to date, coupled with admissions by City staff and officials regarding the specific circumstances surrounding the sewage infiltration into the Parties' homes, clearly establishes that this was a failure at an "operational" level that allows the Parties to avoid sovereign immunity and to pursue claims for significant damages. The parties' actual damages likely exceed statutory caps. Given the egregious circumstances of this literal and figurative "mess," a claims bill is not out of the question. Due to the amount and length of time that the Parties' homes were essentially cesspools as the result of raw sewage being pumped into their homes by the City, the value of these homes has decreased significantly. As you know, pursuant to Florida law, these homeowners now have a legal obligation to disclose the contamination of their homes to prospective purchasers, thus severely impacting the resale value of the homes. While the Parties would prefer to handle their outstanding claims in a an non-adversarial forum, they do not believe that the offer as presented will "make them whole," as the City has continually promised it would. To that end, and again in an effort to avoid potential litigation, the Parties have asked that I transmit to you, as the City's representative in this matter, a counter offer for your consideration. The Parties are aware that many of the other legal avenues available to them will not come without a cost. Therefore, the Parties have reduced the amounts that they are requesting by $12,500.00 each. This value was derived by assuming that the Parties would be expending, at a minimum $50,000.00 collectively to resolve their outstanding claims in another forum. Given that the four Parties named above would be contributing equally to the resolution of this matter, each has estimated that they will likely be expending $12,500.00 above and beyond monies expended to date to bring this matter to a close. This amount has been subtracted form the amounts previously submitted. The new figures, submitted as counteroffers to the City's offer set forth in your September 12, 2005 letter, are presented below: MIZE Compensation Total requested in May 2005 transmittal: $104,620.00 Counteroffer: $92,120.00 Please note that the spreadsheet prepared by the City is in error by $1 Ok in the amount listed for payment to the Mizes. The correct figure for rebuilding is $35,780. (The League withheld $10,000 for the USAA lien on a partial payment to them, dated October 20,2004). GERMAN Compensation Total requested in May 2005 transmittal: $96,010.00 Counteroffer: $83,510.00 RUTHERFORD Compensation Total requested in May 2005 transmittal: $189,950.35 Counteroffer: $177,450.35 0059909\112350\880599\ 1 McLemore September 15, 2005 Page 3 BIBILIONI Compensation Total requested in May 2005 transmittal: $100,000.00 Counteroffer: $97,500.00 If you are in agreement to the revised figures set forth above and are willing to recommend that the City settle with the Parties based on these counteroffers, then there is no need to meet this evening and the Parties respectfully request that this matter be scheduled before the Commission at the earliest possible date for approval. Altematively, if you do not accept the counteroffers set forth herein, but believe that a meeting this evening would facilitate settlement figures acceptable to all sides, then the Parties are in agreement to attend the meeting as scheduled. If you do not accept the counteroffer herein and you do not believe that a meeting this evening would facilitate an acceptable settlement amongst the Parties, then the Parties respectfully request that this matter be scheduled before the Commission at the earliest date available. The Parties expect that they will be afforded reasonable time and opportunity during the Commission meeting to set forth their claims, including, but not limited to photographic evidence, expert testimony, and written documentation, including that obtained from the U.S. Environmental Protection Agency, regarding this matter and their resulting losses. Additionally, the Parties make it known that their appearance before the Commission, in attempt to bring this matter to an amicable closure, should the counter offer herein be rejected, is not to be construed in anyway as waiving any legal rights that the Parties have or might have under any applicable law and or regulation. Should the Parties be forced to proceed to litigation, a complete review of the all of the City's files regarding this matter will be required. Additionally, we will be requesting, among other files, a review of the Utility Departments operational records, personnel training records and certain personnel work schedules. The Utility's permitting files, as well as any files relating to monitoring data, exceedances of any permit criteria, notifications to any regulatory agencies and any correspondence received by reguiatory agencies pertaining to the operation, permitting, design and construction of the waste water treatment system and associated conveyance systems. Thank you for attention to this matter. As time is of the essence, with respect to this evening's meeting, your prompt response is greatly appreciated. Sincerely, ~~n~ 0059909\112350\880599\1 McLemore September 15, 2005 Page 4 AHL/tmn c: Anthony Garganese, City Attorney, City of Winter Springs James Toscano, Esquire Jack Rutherford Jose Biblioni Mark & Theresa German Davjd Mize 0059909\112350\880599\1 CITY OF WINTER SPRINGS, FLORIDA 1126 EAST STATE ROAD 434 WINTER SPRINGS, FLORIDA 32708-2799 Telephone (407) 327-1800 Ronald W. McLemore City Manager September 12,2005 Sent Via Facsimile 407-843-4444 Anna Long, Esquire Lowndes, Drosdick, Doster, Kantor & Reed, P .A. 215 North Eola Drive Orlando, FL 32801 RE: City of Winter Springs - Sewer Backup Claims Dear Ms. Long: The City Attorney and I appreciated the opportunity to discuss this matter with you. We feel it is important to reiterate our understanding of our meeting for settlement purposes. First, at our meeting we provided to you a written status report outlining the claims and payments to date. The report also identifies those claims that the city believes are ineligible for payment such as diminution of property value. Although you indicated that you are currently representing only the Bibilioni, German, Mize, and Rutherford parties, the city's position outlined at our meeting and in this letter affect all parties that have made claims regarding the sewer backup' incident during Hurricane Charley. The summary of the city's position is as follows: 1. Although we believe the parties are not entitled to it, I would be willing to recommend to the City Commission that the city pay out-of-pocket depreciation as identified by the city's insurance carrier. 2. Regarding other out-of-pocket expenses, these items are not negotiable and the city will not substitute its judgment for the city's insurance carrier. 3. With respect to pain and suffering, according to the city's insurance carrier, to date no proof has been submitted by any party which legally substantiates these claims. If any party believes that they have a legitimate claim for pain and suffering, the party must submit proof of such claim to the city's insurance carrier for consideration. . -~~-,""--""",~,-,"'P'.,"",,",~-,"-,-,,,,-,,~~~-------- 4. Since each party has or will have their property restored by the city through our insurance carrier, diminution of property values is not eligible for coverage. Therefore, this item is not negotiable. Lastly, as an offer of good will and understanding for the significant inconvenience this incident has caused each party, I am willing to recommend to the City Commission that each party receive $5,000. We emphasized that this good will payment must be equal for each party, and that each party would provide the city with a full release from all other claims. We look forward to hearing from you on Thursday, September 15,2005, after you meet with your clients to discuss this matter. Sincerely, /fpruU.I W .'Jn~ Ronald W. McLemore City Manager /jp cc: City Attorney 091205 Reiteration of Understanding of Attorney Meeting LAW OFFICES JOHNSON, ANSELMO, MURDOCH, BURKE, PIPER &, lvlcDuFF, P.A. A PROFESSIONAL ASSOCIATION SCOTT D. ALEXANDER. PA MICHAEL T. BURKE *t JONATHAN F. CLAUSSEN CAROLYN A. EGAN ERIN E. GILL JEFFREY L. HOCHMAN, PA E. BRUCE JOHNSON' CARLOS F. MARTIN RICHARD H. McDUFF, PA * ROBERT E. MURDOCH MICHAEL R. PIPER, PA * WILLIAM E. PLATOW JEREMY A. SCHINDER RSCl:::- DAVID M.SCHWEIGER. P.A. ~ I \It:::- N"AMARA M. SCRUDDERSt CUHRISTOPHER L. SMITH OCT 2 ' CINDY A. WILLIAMS 0'.' A : 200~ RETIRED. 7IooiI'\/'Ms (\~^J RONALD P. ANSELMO ''<II'' T;ElfURL F. GEORGE 2455 EAST SUNRISE BOULEVARD SUITE 1000 FORT LAUDERDALE, FL 33304 (954) 46~100 Broward (305) 945-2000 . Dade TELECOPIER (954) 463-2444 * BlMRD CERTIFIED eli'lL TRIAL LAWYERS t BlMRD CF-R11FlED APPELLATE LAWYERS October 19, 2004 Ms. Bonnie Wright Florida League of Cities, Inc. PO Box 538135 Orlando, FL 32853-8135 Re: Winter Springs Dear Ms. Wright: Enclosed please find answers to the issues you presented to me. The attached memorandums confirm our recent conference wherein I informed you that intangible damages as well as claims for diminution of value of the claimants' homes should not be recoverable. The measure of damages for the homeowners is the cost of repair and restoration of their homes and not the alleged diminution in value of their homes. If you have any questions or need additional information, please feel free to contact me. Yours very truly, EBJ/cy encl. . . . Bonnie Wright - Winter Springs ISSUE PRESENTED: What is the measure of damages to real property which occurred as a result of a negligent act of a governmental employee and did not involve a latent defect to the real property. ANSWER: The law of damages for wrongful injury to real property is measured by the cost of repairing or restoring the property to its condition prior to the injury as long as the cost of restoration is less than the diminution in value of the property. See Davey Compressor Company vs. City ofDelray, 639 So.2d 595 (Fla. 1994). . When the type of damage to the home is temporary in nature, meaning that it can be restored or replaced, the court will only award the cost of replacement, repair or restoration. See American Equity Ins. Co. vs. Ginhoven. et aI.. 788 So.2d 388 (Fla. 5th DCA 2001). See also Dawson vs. Jones. et al., 512 So.2d 311 (Fla. 2nd DCA 1987). A home that has been damaged due to a sewage backup caused by the City's improper pumping of a lift station is a temporary damage capable of being corrected. Therefore, diminution of value is not a recoverable damage. In the homeowners' cases against the City of Winter Springs, there is no history of repeated plumbing or sewage backups. Therefore, the homeowners, when selling their property, do not have a duty to disclose this one time event. The sewage backup also occurred as a result of a negligent act which occurred off the premises of the homeowners. There is no duty under Johnson vs. Davis, 480 So.2d 625 (Fla. 1985), to disclose this type of incident. In summation, the homeowners who incurred damage as a result of sewage being pumped into their homes are entitled to receive the cost ofrestoring the property to its original condition and not to the extent of placing the homeowners in a better condition than they were originally. See Keyes Company. et al.. vs. Sheil, 372 So.2d 493 (Fla. 4th DCA 1979). The homeowners are not entitled to also receive damages for their homes perceived diminution in value. ~-,.",....;_...-._-~'----~'~' ISSUE PRESENTED: Whether the homeowners who suffered damage to their property as a result of a sewage backup are entitled to mental anguish, humiliation, and inconvenience. ANSWER: The homeowners who suffered damage to their homes as a result of a sewage backup are not entitled to intangible damages such as mental anguish, humiliation and inconvenience. Pursuant to the Florida Impact Rule, a person cannot recover damages for emotional distress caused by the negligence of another unless the emotional distress they suffered flowed directly from physical injury sustained in an impact. See R.I. vs. Humana Florida. Inc., 652 So.2d 360 (Fla. 1995) (quoting, Reynolds vs. State Farm Mutual AutoJDobile Insurance Company. 611 So.2d 1294 (Fla. 4th DCA 1992). See alsQ the Supreme Court of Florida Case of Rowell vs. Holt, 850 So.2d 474 (Fla. 2003) which states clearly that the Impact Rule requires that before a plaintiff can recover damages for emotional distress caused by the negligence of another, the emotional distress must flow from physical injuries sustained in an impact. .