Hawthorne’s Insurers at Odds Over Lawsuit Settlement

Hawthorne officials are worried that the city may be forced to cover at least part of a $1.95-million settlement with members of the Vagos motorcycle club while two insurance carriers battle over which one should pay.

The city last week agreed to the settlement with 70 plaintiffs who claimed in a Superior Court lawsuit that their constitutional rights were violated during several raids conducted by Hawthorne police in 1983.

The two insurers are arguing over who is responsible for payment. Two weeks ago, one of them filed suit against both the city and the other insurer, and Hawthorne officials said they may be forced to pay at least part of the award out of rapidly depleting insurance reserves.

“We hope the insurance companies don’t abandon us, because we could not afford to pay the whole amount ourselves,” City Manager Kenneth Jue said this week.

At issue is whether each offense against the plaintiffs constituted a separate “occurrence” under the terms of the city’s coverage.

The primary insurer at the time, Canadian Insurance Co. of Costa Mesa, maintains that the entire Vagos matter amounts to a single incident under the city’s policy, the company’s attorney, Brad Withers, said. Because the policy states that the company is responsible for up to $1 million for each occurrence, Canadian Insurance maintains that it must pay $1 million only, he said.

The city agrees with Canadian Insurance, but the carrier of its secondary coverage, for amounts in excess of $1 million, maintains that it is not liable for the $950,000 balance. Protective National Insurance Co. of Omaha, Neb., regards each violation of rights claimed by the motorcycle club as a separate occurrence and says Canadian Insurance, therefore, owes the entire amount.

“It was obvious to me and Protective National that the case against the city of Hawthorne constitutes multiple occurrences--at least, more than two,” said Lance Orloff, an attorney for Protective National.

Orloff said his client was not told about the case until shortly before the city decided to settle it three months into the trial.

“(Hawthorne attorneys) thought they were going to win the case in the beginning,” Orloff said.

Witnesses in the trial testified that the police had carried on a campaign of harassment against the bikers, breaking into and ransacking club members’ homes, confiscating their motorcycles and pointing guns at the heads of their children during the raids. The Police Department said its officers were searching for a club member suspected of stabbing three men in a bar fight.

“The evidence over trial was that police had a long history of going after the motorcycle gang, for whatever reasons,” Orloff said.