San Bernardino County gets $14 million from insurer in Colonies' case

May 28--San Bernardino County has won a prolonged legal battle with one of its insurers. The California State Association of Counties Excess Insurance Authority paid the county $14 million to cover a portion of a controversial $102 million legal settlement in 2006 between the county and a local developer.

The insurer agreed to abandon its appeal of a $14.5 million judgment awarded the county in November and instead agreed to pay the county $14 million to settle the case, according to court documents filed last month. The settlement ends a nearly 10-year legal dispute over whether the insurance carrier was obligated to cover the county for its landmark $102 million settlement with Rancho Cucamonga investor group Colonies Partners LP in November 2006.

Prosecutors have indicted three former county officials and one of the Colonies partners alleging that campaign contributions to PACs with ties to the supervisors who approved the 2006 settlement were actually bribes. Former Supervisor Bill Postmus has pleaded guilty and agreed to cooperate with investigators.

The CSAC settlement brings the total the county has collected from its insurers in relation to the Colonies settlement to $23.5 million.

In 2007, the county flood control district received $9.5 million from another of its insurance carriers, Travelers Insurance, as reimbursement for the Colonies settlement.

In its lawsuit filed in October 2010, the county alleged CSAC EIA refused to acknowledge its coverage obligations regarding the Colonies settlement.

"CSAC never adjudicated this claim in good faith because it did not want to have to provide coverage for a loss of this magnitude," according to the county's lawsuit.

David Lane, one of the attorneys who represented CSAC EIA in the case, declined to comment on Wednesday.

For the last five years, prosecutors from the San Bernardino County District Attorney's Office and the state Attorney General's Office have maintained that the Colonies settlement was illegal and tainted by bribery. In May 2011, a grand jury indicted a Rancho Cucamonga developer and three former county officials in connection with the far reaching public corruption case.

Developer Jeff Burum, a co-managing partner of Colonies Partners, is accused of paying a total of $400,000 in bribes to three former county officials in exchange for facilitating the $102 million settlement, which ended a nearly five-year legal battle between Colonies Partners and the county over who was responsible for paying for flood control improvements at the Colonies at San Antonio housing development and Colonies Crossroads shopping center in Upland.

Also charged in the case are former county Supervisor Paul Biane, former Assistant Assessor Jim Erwin, and Mark Kirk, former chief of staff for former county Supervisor Gary Ovitt. All four defendants deny any wrongdoing.

Burum's attorney, Stephen Larson, declined to comment Wednesday on the county's settlement with CSAC EIA and its potential impact, if any, on the pending criminal case, which is on track for trial in January.

Criminal case aside, the Colonies civil case, spanning from 2002 through 2006, spurred a spate of other litigation. In 2004, the county sued the city of Upland, Caltrans and San Bernardino Associated Governments, the county's transportation planning agency. The county alleged those entities were partially responsible for any potential monetary damages collected by Colonies because they were responsible for the planning, design and construction of the 210 Freeway expansion and a storm drain built in Upland in connection with the project that became the crux of Colonies' lawsuit against the county.

Colonies Partners maintained that the then-newly built storm drain diverted contaminated floodwater onto Colonies' property, causing extensive damage, hindering development and prompting flood control improvements that the county refused to pay for. Burum ultimately built a 70-acre flood control basin on the property to collect the floodwater, which the county flood control district resumed responsibility for following the 2006 settlement.

In March 2013, the county agreed to walk away from the 9-year-old $46 million indemnity lawsuit against Upland, Caltrans and SanBag. At the time, then Board of Supervisors Chairwoman Janice Rutherford said the lawsuit "was absolutely toxic for our cities and county working together for the good of the region."

In return, the defendants agreed not to pursue legal fees from the county. Instead, they went after their insurance carriers.

Last year, Upland recovered a total of $10.4 million from its insurers. It was unclear Wednesday if SanBag and Caltrans have received any monetary compensation from their insurers to cover legal fees associated with the county's indemnity lawsuit.

San Bernardino County officials declined to comment Tuesday on its settlement with CSAC.

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