Anaheim Feeling Some Heat From Lawsuit Over Fire

By late last week, lawyers for the City of Anaheim could begin to see the light at the end of two long legal tunnels.

The city and its insurers had paid out more than $11 million to all but about 20 of the 1,300 people and businesses claiming that the city was responsible for a massive fire in 1982 that destroyed 17 acres of apartment buildings.

And city lawyers had won dismissals of all seven lawsuits that had been filed alleging that Anaheim failed to properly fight a disastrous chemical fire last summer at the Larry Fricker Co. that forced the evacuation of 7,500 people in three cities.

But just as Anaheim was bringing those two well-publicized fire cases toward a close, a lawsuit over a new fire--the July 3 blaze that damaged or destroyed 70 apartments on East La Palma Avenue--was filed, with the threat of more.

The expected rush of lawsuits in this latest fire promises to be far more costly to defend, regardless of the outcome. There will be no help from the three insurance firms that provided $19.5 million in coverage for the city in 1982, because as of July 1, Anaheim chose to become self-insured--what many refer to as “going bare.”

“Of course, we had some insurance coverage in 1982 and for the Fricker fire,” Assistant City Atty. Robert Franks said last week, but now “it’s safe to say that we are on our own.” City officials were so worried about the city’s liability in this latest fire that they gave careful legal scrutiny to a report on circumstances surrounding the blaze at the Casa de Valencia Apartments, before it was made public. The report, released Wednesday, dealt with delays caused by a broken fire hydrant and pinpointed the cause of the fire as illegal fireworks landing on wood shingle roofs.

But in the litigation over the June, 1985, toxic fire at the Larry Fricker Co. chemical warehouse, the city has had complete success.

Seven lawsuits claimed that the city, as well as the Fricker firm, were negligent. Anaheim has been dropped as a defendant from each one, according to Edward W. Hess, a lawyer retained by the city to handle the litigation.

“The suits alleged that Anaheim was negligent in failing to inspect the Fricker facility or failing to enforce alleged city code violations,” Hess said. “They have all been resolved in Anaheim’s favor before trial.”

That swift legal success, from the city’s viewpoint, has not been true for litigation filed in the wake of the massive 1982 blaze--dubbed the “firestorm.”

It began with a frayed power line swaying against a palm tree during fierce Santa Ana winds on April 21, 1982. The sparks quickly jumped to roofs, and the ensuing blaze destroyed 53 buildings and 393 apartment units.

The city-run utility, owner of the power line, was sued for negligence. Several apartment owners were also sued for alleged negligence in failing to use fire-retardant roofing.

Insurers for the city have paid almost $9 million in a round of settlements for property damage to commercial businesses, principally the owners of apartment buildings.

Insurance firms had first claimed almost $20 million from the city as reimbursement for the money they paid to cover the losses. The city has also settled with most insurers who claimed reimbursement for payments made to tenants with homeowners’ policies.

In three more recent agreements--in December, April and June--the city settled with the vast majority of about 230 people who had no homeowners insurance, or whose homeowners policies did not cover their full loses.

The total settlements for individuals so far were estimated at about $2.5 million, with about $600,000 of that for non-economic damages such as emotional distress, according to Roger P. Tomalas, a lawyer for one of Anaheim’s insurers. Fewer than 20 people have yet to settle.

Anaheim’s liability insurance totaled $20 million from three firms at the time of the fire. The city was required to provide a $500,000 deductible.

The city and its insurers agreed to pay 70% of economic loss, loss of personal property, interest charges on Small Business Administration disaster loans, and any loss of earnings.

The owners of the apartment buildings and their insurers still face claims for the remaining 30%.

Claims for emotional distress have been paid, in addition. The average has been $3,000 per person, with up to $15,000 in extreme cases.

Anaheim’s decision to insure itself is not the only difference in the city’s potential liability for the fire last week, compared to that of 1982.

In discussing the last round of settlements, one lawyer suggested that Proposition 51 should apply. The initiative, passed overwhelmingly by California voters June 3, limits some areas of payments related to civil liability.

Legal experts are debating when Proposition 51 went into effect--and whether it applies to pending cases. Its impact is uncertain because it hasn’t been tested in the courts yet.

In Anaheim’s case, lawyers involved suggested that any application of Proposition 51 could result in giving people with similar or identical claims based on the same evidence disproportionate amounts of damages if the apartment owners are found to be at fault in a trial.

Superior Court Judge Philip E. Schwab, who has handled the most recent settlements in the 1982 fire, did not rule directly on the question.