8-KOther Events

American Water Works Company, Inc. 8-K Report, Corporate Update (Sep 19, 2017)

Filed September 19, 2017For Securities:AWK

Summary

American Water Works Company, Inc. (AWK) has reached a significant settlement with one of its general liability insurance carriers regarding the 2014 Freedom Industries chemical spill. This agreement resolves a lawsuit filed by AWK's subsidiary, West Virginia-American Water Company (WVAWC), against the insurer for failing to participate in the initial class-action settlement. The new settlement provides AWK with $22 million, reducing WVAWC's potential contribution to the class-action settlement from $65 million to $43 million. This development is a positive step for investors as it reduces the company's financial exposure related to the spill. The $22 million received is expected to result in an after-tax benefit of approximately $13 million in the third quarter of 2017. While the company continues to pursue coverage from another non-participating carrier through arbitration, the outcome of that action remains uncertain, and investors should monitor this ongoing situation.

Key Highlights

  • 1American Water Works Company (AWK) settled a lawsuit with a general liability insurance carrier for $22 million related to the 2014 Freedom Industries chemical spill.
  • 2This settlement reduces WVAWC's potential contribution to the class-action settlement from $65 million to $43 million.
  • 3The company expects an after-tax benefit of approximately $13 million in Q3 2017 from this insurance recovery.
  • 4The settlement resolves claims against the insurance carrier concerning their non-participation in the initial class-action settlement.
  • 5AWK is continuing to pursue insurance coverage from a remaining non-participating carrier via mandatory arbitration.
  • 6The ultimate success of obtaining further reimbursement from the remaining carrier is not guaranteed.

Frequently Asked Questions

American Water Works Company (AWK) received $22 million from one of its insurance carriers to settle a lawsuit concerning the carrier's refusal to participate in the broader settlement for the 2014 Freedom Industries chemical spill. This significantly lowers the financial burden on AWK's subsidiary, West Virginia-American Water Company (WVAWC), regarding its contributions to the class-action settlement.

The $22 million settlement is anticipated to result in an after-tax benefit of approximately $13 million for AWK in the third quarter of 2017. This reduces the company's net cost associated with the chemical spill litigation.

No, while this settlement resolves the dispute with one insurance carrier, AWK and WVAWC are still pursuing insurance coverage from another non-participating carrier through mandatory arbitration. The outcome of this arbitration is uncertain.

Prior to this settlement with the insurance carrier, WVAWC's potential contribution to the class-action settlement was $65 million. With the $22 million recovery, this potential contribution has been reduced to $43 million.