Damage from the broken water main that spewed millions of gallons into downtown Minneapolis will cost the city at least $325,000, but the fight over who pays is just starting to be hashed out between insurers and lawyers.

The city said costs from the Jan. 3 rupture, which was unprecedented in modern city history, will likely rise. It also doesn't take into account the dozens of vehicles destroyed at the flooded post office parking ramp or the cost to businesses and restaurants that were forced to close early.

"We do have substantial damages, there's no doubt about that," Postal Service spokesman Pete Nowacki said Thursday. A damage tally is not yet available, he said.

The corner on the northeastern edge of downtown where the backhoe tore into the 36-inch water main is back to normal now. But in the moments and days after the rupture, crews worked around the clock to repair the damage, reroute traffic and clean the mess.

Crews had to shut off water to isolate the rupture. Equipment shoved the water across Hennepin Avenue toward the nearby Mississippi River. Detour routes were established. A temporary above-ground pipe was installed to serve the isolated area. The ruptured section of pipe was replaced. Temporary paving was laid down at the excavation. The new pipe was doused with chlorine and water was tested to make sure it was safe to drink. Much of that work happened on overtime, as workers labored on repairs over the weekend.

The city is self-insured, meaning that it sets aside money to cover losses based on past history, but it still seeks to recover what it shells out for losses.

Peter Ginder, a deputy city attorney, said typically the city begins informal discussions with those it finds responsible for damage to public property, hoping that they can resolve liability and reimbursement among themselves.

"Sometimes people will acknowledge that yes, my car ran over your fire hydrant," Ginder said.

But if that doesn't work, the courts become a forum for resolving those issues.

Determining who pays for the water main broken by an excavating hoe could be complicated by contractors up to three deep on the project.

Lengthy process

City Engineer Steve Kotke said his understanding is that there were at least three levels of construction involvement: general contractor Ryan Companies, subcontractor United Water & Sewer, and RPU Inc. of Hopkins, a sub to United that was actually using the hoe as it was driving a sleeve for a sewer connection under the water main and nearby utilities.

Scott Beron, Ryan's public-safety director, referred an inquiry on that point to United, which hasn't returned repeated calls for comment.

"It's going to be pretty much insurance companies and lawyers from now on," Beron said.

And that process could be lengthy: The fallout from damage in 2007 to a Metropolitan Council-owned sewer pipe in Hugo was settled only this week in a Minnesota Supreme Court decision on indemnification between a contractor and its subcontractor.

"These indemnification issues crop up a lot," said Louise A. Behrendt, an attorney for the subcontractor that prevailed. Typically, she said, resolution of disputes rests on who messed up, what agreements among contractors provide for and the direction given by a contractor to a sub.

Then there were the vehicles

The estimate from the city does not include costs incurred by others in the area. For example, 33 Postal Service vehicles and 20 more owned by postal employees were ruined when water flowing down streets inundated the parking ramp at the main post office. That damage easily will amount to hundreds of thousands of dollars. Nowacki said other costs include pumping out the ramp and repair of an elevator.

The private vehicles typically will be covered by owners' insurance, Ginder said, but insurers will then seek to recover costs from whoever is at fault.

The main break attracted attention because it forced many downtown businesses to send their employees home early because of the lack of water caused by a drop in water pressure. It also caused a major traffic jam when Hennepin Avenue filled with water at N. 2nd Street, making it impassable for vehicles as employees headed home. It took nearly a week for drinkable water to be restored to the residents most affected.

The Minneapolis financial summary comes amid a week of frigid weather that has caused a number of smaller water main breaks in Coon Rapids, Fridley, Bloomington, Burnsville and Duluth.

Bloomington, which handled water main breaks this week in Three Rivers Park and the Wells Fargo towers, is on pace to break its average yearly number of about a dozen.

The city already has started a pipe replacement plan because most of its pipes were put in place in the 1950s and 1960s, and the Environmental Protection Agency estimates pipes last about 60 years.

steve.brandt@startribune.com 612-673-4438 dchanen@startribune.com 612-673-4465