Case Study: Fire Damage and Construction Delays at RSK DataCenterX’s Data Center Facility


Project Overview

RSK DataCenterX, a global leader in digital infrastructure services, embarked on a multi-billion dollar project to construct a state‐of‐the‐art 100 acre data center facility located in Utah. Supported by federal incentives similar to the CHIPS and Science Act, the project involved the construction of a data center campus designed to host mission‐critical IT operations including cloud computing, financial data processing, and enterprise connectivity. Ground was broken on January 1, 2023, with an expected phased completion in 3 years. The project required extensive civil works—pouring thousands of cubic yards of concrete for the facility’s base—and involved a workforce of roughly 3,000 laborers along with the movement of millions in cubic yards of earth.

Key operational areas were designed to house high‑density server rooms, advanced cooling systems, and robust security measures necessary for high‑availability digital operations. The project will limit its use of water by including a cooling system that runs the perimeter of the site, reducing the amount of water evaporation that occurs, and greatly reducing the water usage that is prevalent at other data centers. The data center will have a capacity of 175 megawatts of continuous power.

A portion of the construction is being developed for lease to RSK’s affiliates with written commitments & pre-leasing closed out before groundbreaking.

The project is expected to be funded with a mix of debt and equity, with the debt component being funded by one of the largest construction loans of this type. The location of this facility was chosen because of its limited risk profile, the population center, fiber-optic network and other company tech and telecommunication servers located nearby. Power and land limitations as well as public opposition in other locales played into RSK’s decision to construct the facility in Utah. Specifically, RSK was focused on the ability to deliver power in scale and in jurisdictions that can fast track it.

The Loss

In March 2025, a catastrophic fire occurred in the main server room while specialized cooling and power systems were being installed. This loss, coupled with subsequent insurance disputes, financing challenges, and quality issues in contractor workmanship, led to severe cost overruns, extended delays, and protracted legal conflicts among RSK DataCenterX, the general contractor (GC), and multiple insurers. In April 2025, the U.S. reintroduced 25% tariffs on semiconductor manufacturing equipment under the Trump-era trade policies. This directly impacted RSK.

Cause of the Fire

Investigations determined that the fire was triggered by:

  • Electrical faults in temporary wiring installed to support high-power data center equipment.
  • Flammable cable insulation and other construction materials that failed to meet enhanced data center safety standards.
  • Insufficient fire suppression systems in a facility that was only partially complete.

Extent of Damage

The fire spread rapidly across approximately 45,000 square feet of the data center’s core server space, resulting in:

  • Loss of high‑density IT equipment (server racks, storage arrays, and network components) valued at over $100 million, due to both smoke and water damage.
  • Structural damage to reinforced concrete floors and steel support systems, necessitating significant reinforcement and repair.

The delay led to:

Financing / DSU

  • Increased financing costs:
    • Additional $1B in emergency loans at an interest rate of 6.2%, boosting annual interest expenses from $124M to $186M, an increase of $62M per year = $62M x 2 = $124M
    • An additional carry period of 2 years for the original loan – $124M x 2 = $248M.
  • Equity Financing: An additional $200M raised via equity issuance diluted existing shareholders by approximately 7%.
  • Increased Operational Costs: Additional costs of $175M resulted from both financing and operational disruptions.
  • Deferred federal incentives: CHIPS Act–style tax credits worth $500M were delayed, impacting liquidity and forcing a reliance on planned and unplanned financing mechanisms.
  • Business Interruption Loss: RSK DataCenterX suffered an estimated $500M in lost revenue from service downtime and delayed onboarding of major clients.
  • DSU Coverage Shortfall: The 12‑month Delay in Start-Up (DSU) coverage proved insufficient as the actual production delay extended beyond 21 months.
  • Market Impact: Extended downtime in data center operations led to:
  • Reputation damage: Delays in rolling out new cloud services and enterprise data solutions undermined RSK DataCenterX’s competitive edge.
  • Insurance Dispute and Claims Handling

Key Dispute Areas

  • Delay in Start-Up (DSU) Claims: Insurers contended that DSU coverage should only extend for the period of indemnity.
  • Business Interruption: While RSK DataCenterX claimed a $500M revenue loss from delayed operational readiness, insurers argued that pre-existing operational shortcomings contributed to the loss.
  • Defective Construction Claims: The GC and RSK DataCenterX clashed over whether substandard wiring and cooling installations—exacerbating the fire’s impact.

Quota Share Program & Coverage Divergences

Divergent Policy Interpretations

  • Insurer A & B accepted fire-related property loss but questioned DSU claims, arguing that pre-existing defective workmanship was a contributing factor.
  • Insurer C & D disputed the method of business interruption loss calculations, delaying payments.

Multiple Claims Adjusters & Legal Teams

  • Insurers A&B hired different adjusters and legal counsel than Insurers C&D.
  • Disagreements over whether fire suppression deficiencies voided parts of the policy.

Settlement Delays

  • Initial payments for property damage were split among insurers, but only a portion of the DSU claim was paid upfront.

Settlement and Payout Challenges

  • Multiple Insurer Disagreements: Divergent interpretations among Insurers A/B versus C/D further delayed a comprehensive settlement.