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HomeMy WebLinkAboutFEDERAL INSURANCE CO. - 1999-10-04i (4) ► :. i . 10/04199 - Counagency Agenda - Page 4 The City Council and the Redevelopment Agency of the City of Huntington Beach will regularly convene in joint session for the purpose of considering the following City Council -Redevelopment Agency Agenda Items. ' The Huntington Beach Parking Authority, Civic Improvement Corporation, and the Huntington Beach Public Financing Authority are also agencies on which Council serves as members. On each Agenda these Agencies may have items scheduled_ 7:00 P.M. - Council Chamber Reconvene City Council/Redevelopment Agency Meeting "* The City Attorney Shall Determine If Any Actions Taken By The City Council or Redevelopment Agency In Closed Session Shall Require A Reporting On Those Actions As Required By Law (Government Code §54957.1(a) (3) (8)). (1) Report of Action Taken — Oct. 4, 1999 Closed Session -- Arnel v. City of Huntington Beach -- agreement approved 6-0-1 (Sullivan absent). (2) Report of Action Taken Pursuant to Government Code Section 54957.1 - October 4, 1999, Ci Council Closed Session — Michael Willett vs. Cit (120.80) On Monday, May 3, 1999, the City Council convened in closed session to discuss the matter of Michael Willett v. City of Huntington Beach, Workers Comp Case No. AHM 0069830. City Council approved settlement of admitted worker's compensation claim by way of Stipulation with Request for Award and Award in the amount of $57,502.50 for a 59% permanent disability with future medical care left open. In addition, an alternative proposal is to be offered the claimant of a Compromise and Release in the amount of $65,000 to close out the City's exposure for future medical care. The Council voted as follows: 7 ayes, 0 Nos; 0 Abstentions. (3) Report of Action Taken — Oct. 4, 1999 Closed Session — Cal Compact Landfill Litigation — Council voted 6-0-1 (Sullivan absent) to reject the settlement offer. (4) Report of Action Taken — Oct. 4, 1999 Closed Session -- City of Huntington Beach v. Federal Insurance Company, et. al. -- Council voted 6-0-1 (Sullivan absent) to enter into a settlement agreement with Federal Insurance Company referring the pending lawsuit to one day arbitration to be paid for by Federal Insurance and limiting damages to no more than $60,871.60. Ralf Call Julien, Bauer, Garofalo, Green, Dettloff, Harman, Sullivan [Present -- Sullivan absent] Flag Ceremony and Pledge of Allegiance — Huntington Beach Police Department Ceremonial Detail. • -JIB HLNTLIGTG\ BEACH TO: Scott Field, Deputy City Attorney FROM: Connie Brockway C& City Clerk DATE: October 19, 1999 SUBJECT: City of Huntington Beach - Federal Insurance Company - Settlement Agreement Approved by City Council on 10/4/99. Attached are both originals of the Settlement Agreement between the City of Huntington Beach and Federal Insurance Company for your transmittal to the other party for signature. Please ensure that our office receives a fully executed original of the agreement for our records. Thank You, Cbmem/99-220:jc LA TORRACA AND GOETTSCH A 1-kW PARTNERSHIP 1999 'N"U'll 19 AVII 9: 49 211 F.•.AS.1, OCEAN BOULEVARD, SUITJ__ 400 POST OFFICE 13OX 21978 I-ONG BEACH. CALIFORNIA 90901-497R ��� 'I'1=I_EPkEONL(Sh2)43h-1RR7 CITY '�,,,,10RFACSIMILF (SG2) 436-9489 HUN T E$ir70M NE Y e-mail: la%iyerf,landglaw.com uehsile: w",&.landblaw.com Henry B. [Ai '!'orrncn November 17, 1999 Scott F. Field Deputy City Attorney P. O. Box 190 Huntington Beach, CA 92648 Re: City of Huntington Beach v. Federal Insurance Dear Mr. Field Pursuant to your recent request, enclosed is the Settlement Agreement and Mutual Release with original signatures. Very truly yours HEN Rid B LaTORRACA :leb Enclosure ~ xf C ; �� S 1 SETTLEMENT AGREEMENT AND MUTUAL RELEASE This SETTLEMENT AGREEMENT AND MUTUAL RELEASE ("AGREEMENT") is made between Federal Insurance Company ("FEDERAL"),.and City of Huntington Beach ("CITY"), (collectively the "PARTIES" or individually, "PARTY"). I. RECITALS WHEREAS, FEDERAL issued an insurance policy which provided coverage for losses to CITY for the period June 5, 1995 to June 5, 1996, subject to its terms and conditions, policy No. 659-50-10 ("POLICY"). WHEREAS, in 1995, Time Warner, Inc., through its subsidiary, KBL Cablesystems, Inc. dba, Paragon Cable, was rebuilding its cable television system and Paragon Cable's general contractor, T.E.P.S., needed to replace a cable in a conduit that entered the basement of the CITY's Central Library, and in order to replace the cable, it was necessary to drain the water from the conduit. WHEREAS, on July 19, 1995, in the course of forcing the water out of the conduit with air pressure, T.E.P.S. soaked the CITY's Nortel Meridian 1, Option 61C telephone switch, containing a large number of computer circuit boards which affected the CITY'a Central Library's entire telephone system ("LOSS"). -1 SETTLEMENT AGREEMENT AND 4m99.hbl MUTUAL RELEASE _• • WHEREAS, on October 5, 1995, Nortel informed the CITY it had two options: (1) replace the switch and purchase a new telephone pystem'for $121,812.00; or (2) decontaminate, refurbish, and repair the switch for $31,343.50 and Nortel recommended that the CITY replace the system and after -the loss occurred, the CITY did so. WHEREAS, after the LOSS occurred, the CITY presented a claim against Paragon Cable for the damages to the telephone switch and out-of-pocket expenses. WHEREAS, Paragon Cable and T.E.P.S. blamed each other for the LOSS. WHEREAS, on April 9, 1996, the CITY filed a lawsuit against KBL Cablesystems, Inc., d.b.a. "Paragon Cable," and T.E.P.S. in Orange County Superior Court, case No. 76 22 29 and Paragon Cable cross -complained against T.E.P.S. ("THIRD -PARTY SUIT"). WHEREAS, on April 1, 1997, the CITY submitted a first -party property claim for the LOSS through, AON Risk Services. WHEREAS, on May 19, 1997, FEDERAL sent a letter to CITY regarding CITY's claim of LOSS. -2 SETTLEMENT AGREEMENT AND 4m99.hbl MUTUAL RELEASE WHEREAS, on June 20, 1997, FEDERAL sent a letter to CITY inquiring as to the status of settlement discussion in connection, with 'the THIRD PARTY SUIT. WHEREAS, on July 10, 1997, CITY wrote FEDERAL informing it of the status of the settlement discussions and requesting that FEDERAL make up the difference to the CITY between the final settlement value of the system and $125,000. Through this same letter, FEDERAL was provided with a copy of the settlement proposal. At no time did FEDERAL ever object to the terms and conditions of the settlement. WHEREAS, CITY settled the THIRD -PARTY SUIT with CNA, T.E.P.S. insurer for $90,000 on August 8, 1997. WHEREAS, on October 7, 1997, the CITY wrote FEDERAL to inquire as to the status of FEDERAL's decision regarding the CITY's first -party property claim. WHEREAS, on November 10, 1997, FEDERAL sent a denial letter to CITY for its claim of LOSS. WHEREAS, on December 10, 1997, CITY sent an exception to FEDERAL's denial letter. -3 SETTLEMENT AGREEMENT AND 4m99.hbl MUTUAL RELEASE WHEREAS, on March 4, 1999, CITY filed City of Huntington Beach v. Federal Insurance Company, Chubb Group of Insurance Com afi Inc.• and Does 1--10, Orange County Superior Court Case No. 806398 ("BAD FAITH ACTION"). WHEREAS, on March 29, 1999, the BAD FAITH ACTION was removed to the United States District Court for the Central District Court of California pursuant to 29 U.S.C. 51441(b) and it is pending in the Western Division of the United States District Court for the Central District of California, Case No. SACV99-543 AHS (Eex) before the Honorable Alicemarie H. Stotler, United States District Judge. WHEREAS, on April 5, 1999, FEDERAL filed an answer to CITY's BAD FAITH ACTION, denying liability and asserting various affirmative defenses. WHEREAS, FEDERAL's POLICY contains the following conditions: SECTION VI OTHER CONDITIONS 5. SUBROGATION WAIVER CLAUSE This insurance shall not be invalidated should the Named Insured waive in -4 SETTLEMENT AGREEMENT AND 4m99.hb1 MUTUAL RELEASE writing prior to a loss any or all right of recovery against any party for loss occurring to the property described, provided, however, that in the event the Insured waives only a part of his/her rights against any particular third party, the Company shall be subrogated with respect to all rights of recovery that the Insured may retain against any such third party for loss from the perils insured against to the extent that payment therefor is made by the Company, all subject to the following additional provisions: A. If made before loss has occurred, --such agreement may run in favor of any third party. B. If made after loss has occurred, such agreement may run only in favor of a third party falling within one of the following categories at the time of loss: (1) a Third Party insured under this policy; _5 SETTLEMENT AGREEMENT AND 4m99.hb1 MUTUAL RELEASE 1 1 • (2) a corporation, firm or entity (a) owned or controlled by the Named Insured or in which the Named Insured owns capital stock or other proprietary interests, or (b) owning or controlling the Named Insured, or owning or controlling capital stock or other proprietary interest in the named Insured; -(3) a tenant of the Named Insured; 1034 (4) directors, officers or employees of the Named Insured. _6 SETTLEMENT AGREEMENT AND 4m99.hbl MUTUAL RELEASE 9. NOTICE OF LOSS It:is agreed that the Insured, shall render a report of loss after knowledge of a loss, as soon as practicable, furnishing all available data to the Company. 17. SUIT AGAINST THE COMPANY No suit or action on this policy, other than for declaratory relief for the recovery of any claim, shall be sustainable in any court of law or equity unless the Insured shall have fully complied with all the requirements of this policy, nor unless commenced twelve (12) months next after discovery by the Insured of the loss, provided that if such limitation is prohibited by the laws of the State wherein this policy is issued, then and in that event, no suit or action under this policy shall be sustainable unless commenced within the shortest limitation permitted under the laws of such State. _7 SETTLEMENT AGREEMENT AND 4m99.hbl MUTUAL RELEASE 0 - WHEREAS, the PARTIES desire to settle all disputes arising out of the LOSS, the CITY's claim of LOSS to FEDERAL and the BAD FAITH ACTION. II. AGREEMENT NOW, THEREFORE, in consideration of the mutual promises, covenants, conditions and obligations set forth herein, the PARTIES hereto agree as follows: 1. Consideration a. CITY hereby releases FEDERAL, its officers , directors, shareholders, partners, attorneys, agents, representatives, employees,.subsidiaries, affiliates, insurers, reinsurers, predecessors -in -interest, successors -in -interest, heirs, executors, administrators, and assigns, from any and all claims arising out of the LOSS or the BAD FAITH ACTION and agrees to dismiss the BAD FAITH ACTION with prejudice, each party to bear its own attorneys fees and costs. CITY's dismissal of the BAD FAITH ACTION as provided herein is in exchange for the terms of this agreement providing for arbitration. b. FEDERAL shall submit to binding one (1) day arbitration, before a retired California Superior Court Judge or California Appellate Justice within one hundred and twenty (120) days of execution of this AGREEMENT by all PARTIES. The PARTIES agree that former California Supreme Court Justice David Eagleson -8 SETTLEMENT AGREEMENT AND 4m99.hb1 MUTUAL RELEASE i shall be the arbitrator if he is available. Each PARTY shall be entitled to a maximum of three and one-half (3k) hours for its case -in -chief, direct examination, cross-examination, re -direct examination and argument, which passage of time will be determined exclusively by the arbitrator. FEDERAL will pay the entire cost of the arbitration. The issues to be arbitrated will only be whether, under the terms and conditions of FEDERAL's policy, including, but not limited to the foregoing policy conditions in FEDERAL's policy (condition 5, subrogation waiver clause; condition 9, notice of loss; condition 17, suit against the company), the CITY may recover for the LOSS, and if so, whether CITY is entitled (equitably or otherwise) to recover attorney's fees and costs in obtaining the $90,000 settlement as a result of its prosecuting an action against third parties who allegedly caused the LOSS (but not attorney's fees and costs in obtaining coverage). 2. If CITY is entitled to recover under the POLICY for the LOSS, the amount paid for the LOSS will be Twenty -Five Thousand, Eight Hundred Seventy -One Dollars and Sixty Cents ($25,871.60) calculated as follows: $ 19,059.60 Temporary Repairs & Cost of System Evaluation $1211812.00 Cost of Replacement Systems ($ 25,000.00) Less Deductible ($ 90,000.00) Less Settlement Recovery $ 25,871.60 Net claim. -g - SETTLEMENT AGREEMENT AND 4m99.hbl MUTUAL RELEASE � J E gJIT1YL hereby warrants that it returned the damaged system to Nortel; that the $121,812.00 cost for replacing the system was paid by CITY and reflected a $10,000 offset for the salvage value of the damage system returned to_Nortel; and that CITY did not receive any amount for salvage of -the system damaged by the LOSS, other than a credit for salvage of the damaged system reflected in the $121,812 cost to replace the system. CITY agrees that in the event this warrantyis false, CITY will not be entitled to recover in the arbitration and will be liable to FEDERAL for its attorney's fees and costs caused by a breach of this warranty. 3. If CITY is entitled to recover under the POLICY for the LOSS, CITY may prove entitlement and the amount of attorney's fees and costs owed under the POLICY and/or in equity in prosecuting the THIRD -PARTY SUIT, but not by reason of any tort liability which is not a subject of the arbitration or for obtaining coverage. --The maximum attorney's fees and costs provable by CITY is Thirty -Five Thousand Dollars and No/Cents ($35,000.00) calculated as follows: $25,000.00 Maximum claim for attorney's fees for prosecuting THIRD -PARTY SUIT $10,000.00 Maximum claim for litigation costs, deposition costs and expert costs $35,000.00 Total maximum claim for attorney's fees and costs in prosecuting the 10-- SETTLEMENT AGREEMENT AND 4m99.hbl MUTUAL RELEASE 4. CITY's dismissal of its BAD FAITH ACTION with prejudice does not in any way collaterally estop it from pursuing, ;and nothing in the general release constitutes a collateral estoppel to pursue the arbitration as part of this settlement. 5. Except as mutually agreed upon, there will be no discovery in connection with the contemplated arbitration. However, in light of the fact that FEDERAL has produced documents at the Early Meeting of Counsel, upon execution of this agreement, CITY shall produce to FEDERAL all of its non - privileged documents concerning the LOSS, the claim of LOSS with FEDERAL, and the THIRD -PARTY SUIT. 6. Enforcement Any dispute or controversy between any of the PARTIES to this AGREEMENT regarding the terms of this AGREEMENT, and/or the enforcement of this AGREEMENT, shall be submitted to the court in the BAD FAITH ACTION, who shall be requested to retain jurisdiction of this matter for this purpose only pursuant to Federal Rules of Civil Procedure, Rule 41 in the same manner as California Code of Civil Procedure §664.6. In the event that the court in the BAD FAITH ACTION is unwilling or unable to enforce the terms of this AGREEMENT, the PARTIES hereto agree to submit any dispute as to the terms of this agreement to binding arbitration in Los Angeles County, before a retired California Superior Court Judge or California -�� SETTLEMENT AGREEMENT AND 4m99.hb1 MUTUAL RELEASE Appellate Justice. The prevailing party in any such arbitration shall be entitled, in addition to any other relief awarded by the arbitrator;, to its costs and expenses, including its attorney's fees, actually incurred in connection with the arbitration. 7. Release of Claims As used herein, the term "CLAIM" shall mean any and all contractual and extra --contractual claims, demands, liens, agreements, contracts, covenants, debts, attorney's fees, costs, expenses, damages, judgments, orders and liabilities of whatever kind or nature, in law, equity or otherwise, whether now known or unknown, suspected or unsuspected, that have existed or may have existed, as of the date this AGREEMENT is fully executed (the "EFFECTIVE DATE"), or that could or do later accrue arising out of, in whole or in part, the LOSS, the claim of LOSS, the BAD FAITH ACTION, and the transactions, occurrences, happenings, events, acts or omissions that have occurred as of the EFFECTIVE DATE. CITY hereby releases FEDERAL from any and all CLAIMS arising out of the LOSS, the claim of LOSS, and the BAD FAITH ACTION. FEDERAL hereby releases CITY from any and all CLAIMS arising out of the LOSS, the claim of LOSS, and the BAD FAITH ACTION. -12 SETTLEMENT AGREEMENT AND 4m99.hb1 MUTUAL RELEASE 8. Release of Unknown Claims In executing this AGREEMENT, the PARTIES expressly waive the provisions of California Civil Code §1542, which provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. 9. Binding Effect of Agreement This AGREEMENT is binding on and is for the benefit of the PARTIES, and their respective owners, officers, directors, shareholders, partners, attorneys, agents, representatives, employees, subsidiaries, affiliates, insurers, reinsurers, predecessors--in-interest, successors -in -interest, heirs, executors, administrators, and assigns. 10. Acknowledgement of Compromise. The PARTIES acknowledge that this AGREEMENT constitutes a compromise, at least in part to avoid the expense of litigation, and they shall not be deemed to have made, and have not made, any admission of law or fact or of liability by entering into this AGREEMENT. The PARTIES further acknowledge that this compromise is based on the facts of the LOSS, BAD FAITH ACTION and is not a precedent for the handling or adjustment of any other CLAIM. - 13 SETTLEMENT AGREEMENT AND 4m99.hbi MUTUAL RELEASE 11. No Admission of Liability The PARTIES to this AGREEMENT understand, agree and acknowledge that this AGREEMENT is a compromise settlement of disputed matters and that neither the consideration for this AGREEMENT nor any part thereof, nor the negotiation of this AGREEMENT nor any of the matters contained herein, shall be deemed or construed to be an admission by any PARTY to this AGREEMENT of liability or responsibility of any kind, and that no past or present wrongdoing of any PARTY shall be implied from the negotiation and execution of this AGREEMENT. 12. Warranty of Authority_ The PARTIES each warrant and represent to each other that their respective representatives, whose signatures appear below, are duly authorized to execute this AGREEMENT. 13. Warranty Regarding CLAIMS The PARTIES each warrant and represent to each other that no CLAIM or right to be released under this AGREEMENT has been transferred, hypothecated, assigned or given away to any person or entity. 14. Construction of Agreement This AGREEMENT is entered into in the State of California and shall be enforced in, governed by and construed in accordance with the laws of the State of California. Nothing in this AGREEMENT is intended to interfere with or hinder any -14 SETTLEMENT AGREEMENT AND 4m99.hb2 MUTUAL RELEASE 11 11 PARTY'S ability to pursue claims arising out of any breach of promise, covenant, obligation or warranty contained in this AGREEMENT.; 15. Investigation of Facts In executing this AGREEMENT, the PARTIES each acknowledge that it enters into this AGREEMENT freely and voluntarily with the approval and advice of legal counsel and that it has made whatever investigation that it/hedeems necessary. 16. Entirety of Agreement This AGREEMENT contains the entire agreement and understanding concerning the subject matter between the PARTIES hereto. This AGREEMENT supersedes and replaces all prior negotiations and agreements, whether written or oral. 17. Draftsman Each PARTY hereto shall be deemed to have been the draftsman of this AGREEMENT and the language of this AGREEMENT shall be construed according to its fair meaning and not strictly for or against any of the PARTIES hereto. 18. Modification This AGREEMENT shall not be modified, altered, or amended except by a writing executed by all of the PARTIES or their duly authorized signatories. - 1 5- SETTLEMENT AGREEMENT AND 4m99.hb1 MUTUAL RELEASE • The parties agree to execute documents as may be reasonably requested to effectuate the intent of this agreement. 19. Counterparts This AGREEMENT may be executed in more than one counterpart, each of which will be an original, and all of which shall be deemed to be one and the same instrument. IN WITNESS THEREOF, the PARTIES hereto have executed this AGREEMENT as of the date set forth above. DATED: ! 0 ->4 FEDERAL INSURANCE COMPANY W l 1999. By: rAzt&�L '4�� CYNTH A HAGEDORN Regional Corporate Liability Claims DATED: /Q — / �( , 19 9-9 . CWO'4901maw 0)zoo* doCIO) M WIT4 i By: MAYOR ATTEST: CITY CLERK -16 - SETTLEMENT AGREEMENT AND 4m99.hb1 MUTUAL RELEASE • APPROVED AS TO FORM: DATED: Q&A k ., 1999. DATED: , 1999. a�w 1;4 _ SCOTT F. FIELD Deputy City Attorney City of Huntington Beach HENRY/ . LATORRACA, a Member of LaTOXRACA and GOETTSCH A Law Partnership Attorneys for Federal Insurance Company - 17 SETTLEMENT AGREEMENT AND 4m99.hb1 MUTUAL RELEASE %ITY GF: CITY OF HUNTINGTON BEAD°''`'C"' cA Inter -Department Communication Iggq p,i --8 TO: Connie Brockway, City Clerk FROM: Scott Field, Deputy City Attorney DATE: October 7, 1999 SUBJECT: City of Huntington Beach v. Federal Insurance Company, et al. As reported out at the Council meeting of October 4, 1999, the City Council has approved the settlement agreement authorizing the above -referenced case to be submitted to binding arbitration. Enclosed please find a copy of the Settlement Agreement. Would you please arrange to have the Mayor and yourself sign the two enclosed originals. I will then arrange to have one fully executed original returned to you for your files. Attachments SF-99h] cmos:Clerl 1007 10!07i99 - # 1