New Lawsuit Illuminates an Old Dispute : Discloses $5.5-Million Settlement for Ousted President of Irvine Co.

Peter C. Kremer, the ousted Irvine Co. president who claimed in a 1983 lawsuit that he had been defrauded by the Newport Beach-based development company when it paid him $7.6 million for his 1% share of the company, received an additional $5.5 million nearly two years ago in an out-of-court settlement, a new lawsuit says.

The figure was disclosed Monday in the new suit, filed by the Irvine Co. and its owner, Donald L. Bren, against one of the land development firm’s insurers.

The suit alleges that the New Jersey-based Chubb Group of Insurance Cos. has refused to honor its liability policy and reimburse the Irvine Co. for the Kremer settlement.

The settlement, made in September, 1985, brought to $13.1 million the amount Kremer was paid by the company after he resigned as president in 1983 under pressure from Bren.

Gary Hunt, Irvine Co. executive vice president, said Tuesday that the company would neither confirm nor deny that Kremer was paid $5.5 million in the settlement because the agreement barred all parties from disclosing the amount of the payment.

Kremer was out of town and could not be reached for comment.

But the suit filed Monday against Chubb and its Federal Insurance Co. subsidiary specifically states that Kremer was paid “the exact sum of $5,500,000.”

A Chubb spokesman also declined to comment Tuesday, saying that the company would not even “confirm or deny” that it had issued a liability policy to the Irvine Co.

Lawyers for the Irvine Co. and Bren also declined comment Tuesday.

The Orange County Superior Court suit claims that Chubb issued a $40-million directors and officers liability insurance policy for the Irvine Co. in April, 1982, and “continues to fail and refuse to pay any part of the claim.”

In correspondence cited in the suit, Chubb Group officials claimed that the insurance company is not liable for the settlement because it was made as a result of contracts between Kremer and the company and was not due to any wrongdoing that would have been covered by the policy.

The executive liability policy issued by Chubb, the suit says, covered all directors and officers of the Irvine Co. between 1982 and 1985 for “wrongful acts,” including “errors, statements, acts or omissions.”

As of June 3, 1986, Chubb had refused to pay anything more than half of the defense costs, according to the lawsuit.

Kremer, who was named Irvine Co. president in 1977, resigned on Jan. 1, 1983.

In September of that year, Kremer filed his suit, claiming that when he sold the company his 1% interest--at about $150,000 a share for 50 1/2 shares--Bren deliberately undervalued the firm at $750 million.

But just three months after Kremer sold his shares, the Irvine Co. was valued at $1 billion, or about $200,000 per share, in a deal in which Bren acquired an 86% controlling interest. Subsequently, Bren has increased his stock holdings and he now owns 93% of the company.

In his 1983 fraud suit, Kremer accused Bren of negotiating to buy Kremer’s stock at a price “well below the fair market value” while at the same time “maneuvering to acquire the stock of other Irvine shareholders based on a substantially higher valuation.”

Bren, well-known for his distaste of personal publicity, nevertheless publicly attacked Kremer after the lawsuit was filed. Bren said at the time that he was not directly involved in the Kremer buyout and suggested that Kremer’s suit was an example of the former company president’s “poor judgment.”