Mudslide lawsuit settled for $1.1M

A subsidiary of insurance giant American International Group has agreed to pay Glendale $1.1 million to settle a lawsuit brought by the city in an attempt to recoup roughly $15.5 million it was forced to spend in the aftermath of a destructive 2005 mudslide.

In 2009, Glendale sued AIG’s subsidiary, Insurance Company of the State of California, to recoup the costs associated with damage claims filed by nine homeowners that eventually put the city on the hook for about $12.1 million.

Glendale also paid for the homeowners’ attorney costs — in addition to its legal counsel — which totaled $3.4 million.

The homeowners claimed the city was liable for their property damage after heavy rains in January 2005 caused a mudslide to deluge the 1600 block of Gladys Drive and flow down onto Glenmore Boulevard.

The city said in its lawsuit that its insurance company failed to investigate and cover the homeowner claims that led to the large payout. First filed in Los Angeles County Superior Court in June 2009, the lawsuit was moved to the U.S. District Court of the Central District of California a month later.

The insurance company, which must pay Glendale $1.1 million in two months, did not admit to any fault or liability, according to the settlement.

“We are pleased this matter is resolved,” AIG spokesman Jim Ankner said in a statement.

Councilman Ara Najarian said in an interview that the city believed its insurance plan covered the money it spent on the mudslide damage, but AIG disagreed.

“We would have hoped that we could have gotten more, but balanced against the risk of going to trial, as well as the costs involved in taking it to trial, we thought we’d rather settle than to roll the dice and take it to court,” Najarian said, noting that a judge had advised the city to take a deal.

The money will replenish the city’s liability fund, which has been operating in the red for years.

Both sides must cover their own legal costs, according to the settlement.