DATE: August 9, 2022
TO: Board of Supervisors
SUBMITTED BY: Daniel C. Cederborg, County Counsel
SUBJECT: Settlement Agreement and Release with Lexington Insurance Company and the City of Fresno to Resolve Subrogation Lawsuit Related to Brix-Mercer Building
RECOMMENDED ACTION(S):
TITLE
Approve and authorize Chairman to execute the Settlement Agreement and Release, by which the City of Fresno will pay $25,000 to the County for its deductible for insurance coverage from Lexington Insurance Company for damage from the flooding of the Brix-Mercer Building.
REPORT
Approval of the recommended Settlement Agreement and Release will resolve a subrogation lawsuit against the City related to a water main break and flooding on October 17, 2018, of the Department of Public Health laboratory, located at the basement of the Brix-Mercer Building. Lexington Insurance Company (“Lexington”) paid claims by the County in excess of $11,046,016 and sought subrogation against the City for those payments and for the County’s deductible payment of $25,000. Under the recommended Settlement Agreement and Release, within 30 days after all parties have signed, the City of Fresno (“City”) will pay a total sum of $6,025,000 to settle this matter, with Lexington to receive $6,000,000 for its claims paid and the County to receive $25,000 for its deductible.
ALTERNATIVE ACTION(S):
If the Board does not approve the recommended action, then the County will not receive $25,000 to resolve the case. Litigation will continue against the City.
FISCAL IMPACT:
There is no increase in Net County Cost association with the recommended action. Approval of the recommended Settlement Agreement and Release would allow the County to recoup the $25,000 deductible it paid to Lexington for its insurance claim.
DISCUSSION:
The County is the owner of the Department of Public Health’s laboratory, located in the basement of the Brix-Mercer Building at 1221 Fulton Avenue, Fresno, CA.
On October 17, 2018, a water main, owned and operated by the City, burst along Fulton Avenue, resulting in water entering into the Brix-Mercer Building and flooding the basement laboratory.
The County is insured by Lexington for the damage caused by the water main burst and paid $25,000 to Lexington for its deductible. Lexington paid claims by the County in excess of $11,046,016 and sued the City in subrogation to recover on those payments and to recover the County’s deductible payment.
The recommended Settlement Agreement is the result of a June 17, 2022, mediation involving Lexington, the City, and the County.
ATTACHMENTS INCLUDED AND/OR ON FILE:
On file with Clerk - Settlement Agreement and Release
CAO ANALYST:
Ron Alexander