The city says they were not negligent and had no prior knowledge of any defect in the water line.
CHANHASSEN, Minn. — Allison and Dan Kelly have been living with a nightmare since the morning of Aug. 9. Their beautiful Chanhassen home which they have lived in for 9 years, is now unlivable after a water main break sent hundreds of thousands of gallons of water and mud surging into their basement.
“I looked out the window on our deck to find just a never-ending stream of water pouring down the hill,” Dan recalled. The water flowed nonstop for two hours before the city shut it off. The perimeter of their home was turned into a moat, and their basement was turned into a swimming pool.
Water gushed through the basement windows, filling the lower level with five feet of water. Furniture floated, and mud covered everything. Their daughter, just days away from returning to college for her senior year, lost her computer, electronics, toiletries, and other essentials she had just purchased in preparation for school.
The family’s basement, once a gathering space including a family room with a game table and built-in shelving, is now gutted. What remains is mold, ruined possessions, still an inch or so layer of mud on the ground, and costly repairs. A contractor is removing drywall and debris, but the damage extends beyond what the family can afford.
To make matters worse, neither their insurance company nor the City of Chanhassen is willing to pay for any of the damages. City officials say they were not negligent and had no prior knowledge of problems in the water line. Meanwhile, the Kellys’ homeowner’s insurance does not cover “surface water runoff.”
“You have insurance, you pay a lot of money every year thinking that your home is going to be covered, and there’s nothing," Allison said. "They find reasons not to help you.”
"This is their (the cities) equipment that failed," Dan said. "This is their water infrastructure that failed because of no fault of our own or anybody that lives in this neighborhood."
In a statement to KARE 11, the City of Chanhassen said:
"We understand the tremendous hardship this event has caused for the Kelly family, and we do not take lightly the impact this incident has had on their home and daily life. City staff responded quickly once notified of the situation and the League of Minnesota Cities Insurance Trust has since conducted an investigation into the cause of the water main break. That investigation determined that the City was not negligent and had no prior knowledge of any defect in the water line. Under state law, cities are only responsible for damages when negligence can be shown, and in this case, the LMC's investigation found that standard was not met."
"The City Council held a closed session on August 25, 2025, to discuss this matter. The Council expressed its empathy for the residents impacted by the situation. After exploring various options, the City Council determined that in order to provide compensation to residents outside of an established legal liability, the funds would have to come from the City’s general fund. Using general tax dollars in this manner would mean selecting certain residents for compensation while others in similar situations would not receive coverage. For reasons of fairness, fiscal responsibility and precedent, the Council concluded that the City cannot provide compensation beyond what may be determined through the City’s legal and insurance processes."
The Kellys are now renting an apartment in Chaska and are trying to figure out their next best step forward. They are considering taking legal action, but have not made their decision yet.
A link to the GoFundMe supporting the Kellys can be found here.