MGM Grand to Get $76 Million for Fire Claims
After more than two years of litigation, 28 private insurance carriers have agreed to reimburse the MGM Grand $76 million for claims it paid to victims of a November, 1980, fire, the Las Vegas hotel announced Sunday.
The settlement brings to an end a complex series of lawsuits growing out of the fire in which 85 people were killed and 591 were injured. The fire was blamed on an electrical short in a hotel restaurant.
According to MGM Grand spokesmen, the specific language of the settlement is still under review by the 8th Judicial Court of Nevada, but generally it calls for the brokerage firm of Frank B. Hall & Co. and 28 insurance carriers to pay the hotel $76 million in claims. In January, 1983, MGM Grand agreed to pay $75 million of a total $140-million settlement to 1,357 survivors or their relatives. Efforts to reach a spokesman for the insurers were unsuccessful.
“After nearly five years, everything related to the liability aspect of the fire is finally over,” said an ebullient Bernard Segelin, vice president and general counsel of MGM Grand. “This has been an unfortunate chapter, and it’s really stymied us. But the agreement provides us with new flexibility, and we’re looking forward to getting on with business.”
Under the settlement, $67 million will be paid to MGM Grand on April 15, with the balance to come in two $4.5-million payments over the next two years. The agreement came just four days before opening arguments were scheduled to begin in MGM Grand’s suit against the 28 insurance carriers.
The case involved so many lawyers--49 of them--that a special courtroom was built in an 11,000-square-foot room next to the arena where the University of Nevada at Las Vegas plays basketball. The trial was expected to last eight to 10 months at an estimated cost of $342,000 a day, including legal fees.
The case was novel not only for its sheer size but because it was the first involving retroactive insurance coverage.
After the 1980 disaster--but before settlement with the victims had been reached--broker Frank B. Hall & Co. arranged for 28 carriers to provide $170 million of insurance to MGM Grand. The insurers agreed to provide such coverage with the knowledge that substantial profits could be made if payments to the victims turned out to be sufficiently low. Also, MGM Grand purchased the retroactive coverage for $35 million in premiums, money that could bring a large investment return to the carriers if it took a long time to reach a settlement.
MGM Grand, in tandem with various architects and contractors also sued by the victims, settled with the victims in a relatively short period. Then, the carriers refused to reimburse the hotel, saying MGM Grand had paid too much.
Attorneys for the insurance carriers also argued that MGM Grand should have been reimbursed under $151 million in liability insurance coverage purchased by Del E. Webb Corp., which was renovating offices at the MGM Grand at the time of the fire.
An attorney for MGM Grand said the settlement requires $11.2 million in payments from Del E. Webb, with the remaining $64.8 million coming from the retroactive insurers.
Still unsettled is one remaining lawsuit, involving $90 million in insurance claims made by MGM for property damage and reconstruction costs resulting from the fire that insurance carriers have refused to pay.
