Insurance company to pay city $5.5 million

An insurance company has agreed to pay San Diego $5.5 million in attorneys’ fees stemming from a lawsuit brought by South Bay developer Roque De La Fuente, it was announced today.

The City Council authorized the settlement with the Insurance Company of the State of Pennsylvania, a subsidiary of AIG, in closed session this morning, City Attorney Michael Aguirre said.

Superior Court Judge Linda Quinn awarded the city $1.3 million in attorneys’ fees from the case in April and another $4.3 million in September.

As the city’s insurer, the Insurance Company of the State of Pennsylvania was supposed to be paying the attorneys’ fees accrued by the city in defending the case all along, but refused, according to Aguirre.

The city attorney’s office, with the help of consumer attorney Harvey Levine, sued the company to recover the money.

The Insurance Company of the State of Pennsylvania agreed to pay the city $5.5 million to settle the lawsuit on Friday. The company will also pay San Diego’s legal fees in the case going forward.

“This was a hard, hard-fought case,’’ Levine said at a news conference to announce the settlement. “It lasted about four years. There wasn’t a document, deposition, any issue in the case that wasn’t hard-fought.’’

According to Don McGrath, executive assistance city attorney, it is now up to the Insurance Company of the State of Pennsylvania to decide if it wants to pursue De La Fuente to recover the attorneys’ fees.

In June, Quinn dismissed De La Fuente’s remaining claim against the city for alleged breach of contract stemming from the developer’s Otay Mesa Business Park. He is expected to appeal.

In 2001, a jury awarded De La Fuente $94.5 million in damages on his assertion that the city’s action drove his border business park into bankruptcy. The liability grew to about $150 million with interest, and De La Fuente sought an additional $32 million in attorneys’ fees.

Since that time, the judgment has been reversed in a series of appellate and trial court rulings that favored the city.