One of the largest dams in the Birmingham-area with the greatest risk of failure for the last four years is also the least insured for threats to its nearby suburban communities.
Insurance coverage for Lake Purdy Dam was drastically lowered in late 2021 when engineering reports showed that the century-old structure required major repairs.
Insured for just $1 million to cover damage to homes and property within its path in the event of an accident, Lake Purdy Dam in Shelby County has the lowest amount of coverage among all dams within the system of Central Alabama Water, formerly known as the Birmingham Water Works.
“After Nov. 1, 2021, insurance providers would only provide $1 million in liability coverage after engineering reports indicated the dam needed rehabilitation and repairs,” General Manager Mac Underwood told AL.com.
The dam is part of the system that delivers drinking water for suburban Birmingham communities including Homewood, Hoover, Mountain Brook and Vestavia Hills.
The low insurance rate won’t be enough to even replace two average homes in the area where the dam sits.
Excluding Lake Purdy Dam, the five other dams within the system are covered by $20 million in liability insurance coverage each, Underwood said.
Lake Purdy Dam is listed as a high hazard by the Army Corps of Engineers due to the catastrophic impact that a breach would have on nearby communities.
Underwood, a veteran leader at the utility who returned as general manager in February was not at the agency when the insurance was reduced.
Board members for Central Alabama Water learned about the $1 million policy during a budget work session earlier this week.
Liability insurance for Lake Purdy would be “pocket change” in the event of a major incident, Phillip Moultrie, vice president for client services for Valent Group, the utility’s insurance consultant, told the board Monday.
For example, the average home price in just the 35242 zip code, which includes some neighborhoods near the dam, is more than $500,000 according to various home sites. The water board’s insurance policy would barely pay to replace two of them.
“You can imagine, should that happen to fail, then it could be catastrophic,” Moultrie told the board Monday. “One million would be pocket change. Even $20 million would be pocket change. It’s hard to fathom what kind of liability the board may face should that dam happen to fail.”
Moultrie said he continues to search for a company to cover the dam, but the task has so far been unsuccessful. He’s hard-pressed to find a company willing to cover Lake Purdy in its current condition where repairs are needed and repairs have begun.
Water board leaders past and present have long mulled over the need to repair the dam, which for years has leaked water at its base.
The problem is ongoing. In 1980, the dam leaked about 1.5 million gallons per day, according to old Birmingham Water Works Board meeting minutes. The leak then rapidly accelerated between 2018 and 2019, reaching about 7.6 million gallons a day, according to water works records.
Members of the previous board last year approved an $85 million dam overhaul. Those plans were curtailed months later by leaders of the current utility who questioned the scope, price and engineering advice surrounding the massive project.
The new board then agreed to spend $28 million on the project to continue work that had already begun and address immediate needs.
Still, skepticism remains among water board leaders. The board this week was expected to discuss the project and vote to hire two new engineers to examine the structure. However, the meeting set for Tuesday was cancelled.
Lake Purdy is a main source for the water works. The other is Inland Lake in Blount County.
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