Insurance firm doesn't want to pay for San Bernardino County's settlement with Colonies developer

Two years after San Bernardino County settled with Rancho Cucamonga developer Jeff Burum and his Colonies Partners investor group, the county's insurance company says it doesn't want to pay for the multi-million settlement agreement.

The settlement "arose out of the willful or intentional acts of the County, its district attorneys, or investigators," the 22-page complaint, filed on behalf of Ironshore Specialty Insurance Co., reads in part.

In a complaint filed Aug. 29 in U.S. District Court, Ironshore asked a judge to declare that the company isn't responsible for paying the $69 million settlement, reached in 2020 after Burum and others sued the county for malicious prosecution related to a 2006 settlement following a dispute over flood-control basins at the Colonies development in Upland.

In its complaint, Ironshore argues that the 2011 prosecutions were the result of "a conspiracy to retaliate against the Colonies II Plaintiffs as part of a decades-long dispute over land and water rights in Upland, California, culminating in a malicious prosecution of Burum" and others.

And that, according to Ironshore, means the company isn't required to pay for the settlement.

San Bernardino County, for its part, isn't giving up without a fight.

"The county is aware of the lawsuit and intends to engage in a vigorous defense," county spokesman David Wert wrote in an emailed statement.

It's the latest twist in a 20-year legal battle between the county and the Colonies' developers:

* In 2002, Colonies Partners LLC sued the county after the county declared it would direct run-off from the newly built 210 Freeway extension into flood-control basins on Colonies' properties. After years of legal battles, the county settled in 2006, agreeing to pay the developers $102 million.

* In 2011, former Board of Supervisors Chairman Bill Postmus pleaded guilty to 10 charges connected to the Colonies settlement and his later time as county assessor, including conspiracy to accept a bribe, conflict of interest, misappropriation of public funds and asking for and receiving bribes.

* In 2011, the District Attorney's Office charged Burum, former county supervisor Paul Biane, and Mark Kirk, former chief of staff for former supervisor Gary Ovitt, as well as former Assistant Assessor Jim Erwin, with 29 charges related to the Colonies settlement, including conspiracy, bribery, conflict of interest, misappropriation of public funds, forgery and perjury.

* In 2017, Burum, Biane and Kirk were acquitted of all charges. Prosecutors subsequently dropped all charges against Erwin. Jurors described the trial as a "boondoggle."

* In 2020, Burum and his partners sued the county for malicious prosecution. Later that year, the county agreed to settle with them for $65 million. (The remaining $4 million referred to in the Ironshore suit was paid out to Biane and Kirk.)

No matter what happens with its suit, Ironshore is not on the hook for the full $69 million settlement. The county's policy with the company is for payments above $52.5 million, meaning the company would pay $16.5 million for the settlement.

In its complaint, Ironshore notes the "insurance does not apply to a 'claim' or 'suit' against (the county) for: Any liability arising out of criminal, fraudulent, dishonest or malicious acts or omissions committed by or at the direction of the insured."

Ironshore refers to California Insurance Code, which says insurers are "not liable for a loss caused by the willful act of the insured." But section 533, which the argument cites, also says an insurer is "not exonerated by the negligence of the insured, or of the insured's agents or others," potentially putting the county in the position of arguing that the 2020 Colonies settlement was due to negligence by the District Attorney's Office, not "willful conduct."

The policy also says it will not provide coverage for any lawsuit settlements to which Ironshore did not agree to. According to the company's complaint, the county did not ask for or get written consent from Ironshore before agreeing to the settlement.

Burum declined to comment for this story. He and the other plaintiffs in the 2020 settlement have already been paid, according to Wert.

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