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Fernley Flood Victims Win $18.1M Settlement

Eight years, dozens of lawyers and hundreds of thousands of documents later, more than 200 northern Nevada Fernley flood victims are finally going to be paid for damages suffered when a century-old irrigation canal burst and sent a wall of water into their homes in 2008.

No one was killed or seriously injured but 590 homes in Fernley were flooded when water burst through a 50-foot breach in the canal’s earthen embankment Jan. 5, 2008.

A 2-foot-tall wave swamped the neighborhood and water collected 8 feet deep in some parts of the rural town 30 miles east of Reno. More than a dozen residents were rescued from rooftops by helicopter, while others were taken to safety by boats.

Judy Kroshus, lead plaintiff in the class-action lawsuit the local irrigation district recently agreed to settle for $18.1 million, and her 2-year-old grandchild were stranded by water “up to our windshield” before her son waded several blocks to rescue them.

“We were lucky to get out,” she said.

The aging, 31-mile canal is a key component of the nation’s first federal reclamation project, started in 1903. It’s owned by the U.S. Bureau of Reclamation but managed by the Truckee-Carson Irrigation District (TCID). The bureau concluded within two months of the breach that burrowing rodents had weakened the canal, causing it to fail.

In July 2012, a federal jury returned a verdict during the liability phase of the trial finding the district’s history of negligence in maintaining the canal was primarily to blame. Soon after, the district agreed to a $10 million settlement, but then backed out.

The damages phase of the trial was scheduled to resume two months ago, but the district agreed to the new settlement terms after its members voted in February to raise money to finance the damage award by selling off some water rights to the Truckee Meadows Water Authority. Judge Lloyd George approved the deal March 31.

“The settlement finally brings closure to those who were harmed through no fault of their own,” said Patrick Leverty, lead co-counsel for the plaintiffs.

Kroshus, who’s the director of a tribal health service resource center in Fernley, said she had to short-sell her flood-damaged home and bought a new one just a year ago. “It’s not in the flood area,” she said.

A similar rupture in the same vicinity flooded 60 homes in December 1996.

The $18.1 million settlement includes about $7.8 million in attorney fees and expenses.

Laverty said no one in the class objected to that part of the deal.

Insurer Blasted With $4.5M Class Action Bad Faith Verdict

Reno – Everest Indemnity Insurance Co. is on the hook for $4.5 million after a Nevada state court jury on Thursday said the insurer acted in bad faith by refusing to cover a construction company’s defense costs in an underlying class action stemming from an earthen levee collapse that caused the flooding of hundreds of homes.

Jurors deliberated for only a few hours before deciding that Everest had no basis for refusing to cover defense costs referred to them by Matthews Homes, which held a $2 million commercial general liability policy from the insurer, after Matthews was sued by a class of hundreds of homeowners claiming poorly designed drains exacerbated the effects of a 2008 flood.

A second phase of the trial to consider punitive damages was scheduled to begin next Tuesday. Plaintiffs’ attorney Bob Maddox of Maddox Segerblom & Canepa LLP told CVN his team would be pursuing a “substantial” punitive damages award but declined to comment on the potential amount. Update 2/17: Everest and the plaintiff class reached a settlment before the punitive phase began. Terms of the deal were not immediately available.

The long-running litigation began with the collapse of a century-old levee in Fernley, Nevada in 2008. The plaintiff class claims the levee failed because of overpumping ordered by the Truckee-Carson Irrigation District, but Everest says the levee’s earthen walls gave way because of heavy rain.

Everest initially denied coverage on the basis Matthews’ CGL policy had expired at the time of the flood, but plaintiffs’ attorneys argued the insurer knew Matthews had tail coverage that would apply to the flood even though the CGL policy itself ended in 2007. Despite that knowledge Everest still refused to defend Matthews, Maddox told jurors during his opening statement.

After acknowledging their error, Everest subsequently denied coverage on the basis of an earth movement exclusion in the CGL policy, a decision plaintiffs said the insurer and claims administrator Carl Warren & Co. made in bad faith, because they failed to adequately investigate the actual cause of the levee failure. Everest argued they reasonably concluded the exclusion applied since the movement of earth and soil caused the levee breach, and that the plaintiffs’ complaint states mud entered their homes. The insurer claimed the exclusion applied even if earth movement is only one of a number of factors that cause property damage.

Matthews settled the underlying suit for $5 million in 2012, and as part of the deal the class plaintiffs were assigned any breach of contract and bad faith claims Matthews held against Everest. The same lead plaintiff, Elizabeth Reimers, filed the current class action over those bad faith and breach of contract claims in 2013, arguing Everest is responsible for the $5 million settlement.

Thursday’s verdict and a pending punitive damages award could have a widespread impact on when insurers can invoke earth movement exclusions to deny coverage, which would be of key importance in a state like California, a major market for insurers where events like mudslides are frequent.

Everest had already suffered a significant setback before the jury trial began, after Judge Janet Berry granted summary judgment motions favoring the plaintiff class that said the insurer had a duty to defend Matthews, and that the terms of the earth movement exclusion were ambiguous. In January the Nevada Supreme Court declined to review Judge Berry’s ruling after an appeal from Everest, and the trial over the remaining bad faith and breach of contract claims began on February 3.

Attorneys for Everest did not respond to a request for comment from CVN.

The plaintiff class is represented by Robert C. Maddox and Ardea Canepa of Maddox Segerblom & Canepa LLP and by Vernon E. Leverty and Patrick R. Leverty of Leverty & Associates Law Chtd.

Everest is represented by Brian S. Martin and Jamie R. Carsey of Thompson Coe Cousins & Irons LLP and by Jack G. Angaran of Georgeson Angaran Chtd.

The case is Elizabeth Reimers, et al. v. Everest Indemnity Insurance Co., case number CV13-00737, in the Second Judicial District Court of Nevada in Washoe County.

David Siegel can be reached at dsiegel@cvn.com

Read full news article here.

TCID Found Liable

After a 14-day trial, a jury has found that the Truckee Carson Irrigation District failed to properly maintain the Truckee Canal and is liable for damages suffered by hundreds of Fernley residents during the 2008 flood.

“The jury’s verdict sends a strong message to irrigation districts that they must maintain their project works, especially in areas of increased urbanization,” Patrick Leverty, a lawyer for the victims, said in a statement. “This verdict shows that justice has been done.”

The civil case, heard by Senior Justice Miriam Shearing in the Third Judicial District Court, is one of a handful of class-actions lawsuits filed by victims who were impacted by floodwaters that breached the canal, sending waves through Fernley neighborhoods on Jan. 5, 2008.

Shearing set a status conference for Aug. 30 to discuss the damages phase of the case against the district. The victims are seeking compensation for personal and real property lost or damaged when the embankment failed, said their lawyer, Robert Maddox.

In January, victims who sued Lyon County and district board members received their share of a $10 million settlement.

In that case, the plaintiffs claimed Fernley and Lyon County were negligent by failing to maintain drainage and infrastructure, Leverty said.

About 40 feet of an irrigation canal levee collapsed Jan. 5, 2008, in Fernley, damaging about 600 homes. Residents fled from flooded homes; some were evacuated from their rooftops by helicopters.

The breach of the canal spewed walls of water from 2 to 8 feet high that left 3,500 people temporarily stranded across a square mile. The Bureau of Reclamation blamed burrowing rodents and inadequate maintenance.

President George W. Bush declared portions of Fernley a national disaster area, providing more than $1.75 million in federal assistance to the victims.

In the jury trial that ended Monday, Leverty said the jury found that the district “negligently maintained the Truckee Canal” and that negligence caused the embankment to fail.

Messages left with district officials were not immediately returned.

The district had argued that it was not informed about studies involving internal erosion.

But the jury found that the district was repeatedly alerted that repairs needed to be done, Leverty said.

“Despite being told repeatedly to repair the embankment, TCID did not consider it a priority and never repaired any rodent holes in the Truckee Canal along the urbanized area of Fernley,” he said.
Information from: Reno Gazette-Journal, read more.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten or redistributed.

Residents Pack Fernley City Hall; Questions Still Remain

Kellene Stockwell
Channel 2 News

Hundreds of Fernley residents packed into city hall Monday night to learn if, when or how the federal government will help them with recovery.

“We are all sitting there saying, ‘when is that going to happen? The fed can’t help us. Is the state going to help us? Is something local going to happen?’ I mean, I don’t know,” says victim Kim James.

Governor Jim Gibbons sent a disaster declaration request to President Bush Monday night. If approved, money and resources would come from the federal government.

Fernley Mayor Todd Cutler told residents he knows they’re frustrated but urged them not to start blaming yet.

Click here to read the full article on www.ktvn.com.

Another Class-Action Lawsuit Filed over Fernley Flood

Three law firms have filed a class-action lawsuit on behalf of victims of the Fernley flood – the second such complaint in two days.

In their suit filed in Lyon County District Court in Yerington, Nev. The Reno firms Maddox & Associates, Leverty & Associates and Dunlap & Laxalt are seeking unspecified damages from the Truckee-Carson Irrigation District.

The complaint came a day after Reno Lawyer Robert Hagar filed a suit in Washoe County District Court on behalf of Judy Kroshus, whose home was among hundreds flooded after a storm-swollen irrigation canal ruptured Jan. 5. That suit, which also seeks class-action status, names the irrigation district, local governments and homebuilders as defendants.

Both lawsuits allege that the irrigation district did not properly maintain the canal and failed to minimize damage once the break occurred in the fast-growing town 30 miles east of Reno.

Ernie Schank, TCID president , said the district reacted as quickly as possible after learning about the rupture, which was reported at about 4:20 a.m.

“This will be a complex case.” lawyer Cal Dunlap told the Reno Gazette-Journal. “A lot of this is unknown territory. It’s not immediately clear which laws apply.”

Judges will have to certify the lawsuits as class actions, meaning that the suits represents all plaintiffs affected by the flood.

“It’s unusual for two class actions to be certified,” said Jeffery Stempel, a law professor at the William S. Boyd School of Law at the University of Nevada, Las Vegas. “Filing first is always an advantage.”

Stempel maintained the irrigation district general would be liable for flood damage.

“If you’ve penned up an animal and the animal escaped and hurt someone, it’s usually your responsibility.” He said. “In this case, the district penned up water and it got away from them.”

The irrigation district operates the canal under a contract with the U.S. Bureau of Reclamation, which owns it.

Schank has said he realizes the district will be targeted by lawsuits, but was unsure whether it’s liable for flood damage.

Betsy Rieke, area manager for the reclamation bureau, has said her agency thinks the district would be liable.

Rieke’s agency continues to investigate the cause of the breach, which occurred after unusually heavy rain.

Information from: Reno Gazette-Journal, click here.

Copyright 2008 Associated Press. All rights reserved. This material may not be published broadcast, rewritten or redistributed.

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