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City of Upland Obtains $2.23 Million Arbitration Award in Bad Faith Lawsuit
Case is a follow up to the years-long Colonies litigation
Upland, CA – August 8, 2014 – The City of Upland obtained a $2.23 million arbitration award against Independent Cities Risk Management Authority (ICRMA) Monday from an arbitration panel in a lawsuit alleging insurance bad faith and breach of contract over ICRMA’s failure to defend the City in the Colonies litigation.
This was only phase one of the arbitration. The next phase will adjudicate the consequential damages suffered by Upland as a result of ICRMA’s denial of the tender of defense and should take place in the next 60-90 days. Earlier this year, Shernoff Bidart Echeverria, on behalf of the City of Upland, recovered a $4.75 million settlement with another defendant in the case, the Insurance Company of the State of Pennsylvania (“ISOP”).
In the lawsuit, entitled City of Upland v. Independent Cities Risk Management Authority, et al., Upland alleged that the insurers unreasonably failed and refused to defend the City in litigation flowing from the Colonies litigation. The City of Upland was covered by a memorandum of coverage issued by ICRMA and an excess liability insurance policy issued by ISOP. Despite Upland’s demand for a defense, and despite the insurers’ obligation to provide that defense, both ICRMA and ISOP refused.
“It’s unfortunate that the City of Upland was forced to file this lawsuit to recover the benefits it was owed under the contract,” said Shernoff Bidart Echeverria LLP managing partner Michael J. Bidart. “While this award vindicates the City with respect to recovering defense costs, we still hope to recover all of the other damages that resulted from this bad faith denial of insurance benefits. Those claims will be heard in the next and final phase.”
The Colonies litigation began in 2002 when the County of San Bernardino denied requests to pay for flood-control improvements on a private development near the 210 freeway extension project. The County filed suit against Upland and two transportation agencies in a related action seeking reimbursement for a portion of a $102 million settlement the County reached with The Colonies Partners LP in the Colonies litigation. Following ISOP’s and ICRMA’s denial, the City was left to fend for itself. After years of hard fought litigation, Upland successfully prevailed on all counts; however, Upland spent over $6 million in attorney fees and costs defending itself in the litigation.
“This is a great victory for the City of Upland and its residents,” said Upland Mayor Ray Musser. “We faced serious financial challenges as a result of having to pay the attorney’s fees for defense in the County litigation and this award is a huge boost to the city’s finances and morale.”