Upland seeks reimbursement of legal fees from 2004 Colonies lawsuit [San Bernardino County Sun, Calif.]

July 24--View: ComplaintThe City of Upland has filed a lawsuit against its insurers claiming bad faith and breach of contract by the two companies regarding the 2004 Colonies lawsuit.

Lawyers from the Claremont-based law firm Shernoff Bidart Echeverria and Bentley claim Independent Cities Risk Management Authority (ICRMA) and Insurance Company of the State of Pennsylvania (ISOP) refused to defend Upland in the indemnity case involving San Bernardino County.

Upland was covered by a memorandum of coverage issued by ICRMA and an excess liability insurance policy issued by ISOP, said Gregory L. Bentley, a partner with the law firm currently representing Upland.

"The city, just like individuals, expect to be protected by their insurance company in its time of need," Bentley said. "The insurance company turned its back on the city and left the city to pay."

"That's simply unacceptable."

The city is seeking reimbursement of damages from the case, including attorney fees of more than $6 million.

The lawsuit was filed July 17 at West Valley Superior Courthouse in Rancho Cucamonga.

David Luke, general manager for ICRMA, said Tuesday that he knows of the complaint but has not been served yet.

Luke said he was unable to comment at this time because he has not been able to review the complaint.

The county alleged in its lawsuit filed in November 2004 that Upland, Caltrans and San Bernardino Associated Governments -- the county's transportation planning agency also known as SanBAG- should be held partially liable for any damages to Colonies Partners private property in Upland should Colonies prevail in its lawsuit against the county Flood Control District. In November 2006, the county settled with developer Jeff Burum and his investor group, Colonies Partners LP, for a landmark $106 million. Burum and Colonies brought the suit against the county in March 2002.

The city sent the lawsuit to their insurance companies, asking to be defended in litigation. But the companies denied them and Upland had to pay several million dollars out of pocket to fight the lawsuit, Bentley said.

In March the county, Upland, SanBAG and Caltrans entered into a "walk away" settlement. The county agreed to drop its case and the defendants agreed not to pursue attorney's fees from the county.

Upland did not have to pay damages, but they did have to pay legal fees, attorneys said.

Taxpayers ponied up tens of millions of dollars to cover the cost of the lawsuit. The county spent roughly $28 million, Upland$6 million and Caltrans$12 million, officials said.

"This type of large scale litigation can be a burden for any entity, whether it is a city, a company, or an individual," Bentley said. "For these insurance companies to deny coverage in Upland's hour of need is an abandonment of their most basic duties as an insurer."

Staff reporter Joe Nelson contributed to this report.

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