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14-157 Resolution No. 14-157 RESOLUTION RATIFYING THE EXECUTION OF A SETTLEMENT AGREEMENT WITH ARCH INSURANCE COMPANY REGARDING WATERFORD SUBDIVISION PERFORMANCE BONDS BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN, ILLINOIS, that it hereby ratifies and approves the execution of a settlement agreement with Arch Insurance Company by Sean R. Stegall, City Manager, and Kimberly A. Dewis, City Clerk, regarding Waterford Subdivision performance bonds, a copy of which is attached hereto and made a part hereof by reference. _s/David J. Kaptain David J. Kaptain, Mayor Presented: November 5, 2014 Adopted:November 5, 2014 Omnibus Vote: Yeas: 9 Nays: 0 Attest: _s/Kimberly Dewis Kimberly Dewis, City Clerk SETTLEMENT AGREEMENT This Settlement Agreement is made and entered into as of the V k day of October, 2014, by and between the City of Elgin, an Illinois municipal corporation ("Elgin!% and Arch Insurance Company,a Missouri corporation("Arch"). RECITALS WHEREAS,Kimball Hill Homes,Inc. ("Kimball Hill")undertook to develop certain real property in Elgin, Illinois,commonly known as the Waterford Subdivision,which subdivision is divided into neighborhoods for the purpose of development; and WHEREAS, to secure the construction of certain improvements in the Waterford Subdivision, Kimball Hill procured and delivered to Elgin the following performance bonds issued by Arch,as surety: A. Bond No. SU5020813 dated July 24, 2006, in the amount of $1,727,894.30 pertaining to certain improvements in Neighborhood 2 of the Waterford Subdivision(the"N2 Bond's; B. Bond No. SU5019730 dated March 10, 2006, in the original amount of $1,437,015.36, which amount was subsequently reduced to $617,819.20 on January 30, 2008, pertaining to certain improvements in Neighborhood 3 of the Waterford Subdivision(the"N3 Bond"); C. Bond No. SU5022602 dated March 8, 2007, in the amount of $1,439,927.28 pertaining to certain improvements in Neighborhood 1 of the Waterford Subdivision(the"N1 Bond"); WHEREAS, on or about April 23,2008,Kimball Hill filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Illinois,Eastern Division,as Case No. 08-10095;and WHEREAS, Elgin has notified Arch that Kimball Hill was in default of its bonded obligations and made a demand upon the N1 Bond,the N2 Bond, and the N3 Bond(collectively, the"Arch Bonds"); and WHEREAS, Arch undertook an investigation of the claims asserted by Elgin under the Arch Bonds,which investigation was conducted under a full reservation of rights; and WHEREAS, Elgin and Arch have previously entered into a settlement agreement dated June 30, 2011, (the "June 2011 Settlement Agreement") wherein Elgin and Arch settled certain claims with respect to the N2 bond and the N3 bond;and WHEREAS,Elgin and Arch were not able to settle claims relating to the Wetlands Claim with respect to the N2 bond and the N3 bond and Elgin and Arch were not able to settle or resolve any claims under the N 1 Bond relating to Neighborhood 1;and WHEREAS, Elgin subsequently filed a lawsuit against Arch Insurance Company, Fidelity&Deposit Company of Maryland,a Maryland corporation,and TRG Venture Two,LLC a Delaware limited liability company, in the Circuit Court of Kane County under Case No. 12 MR 53 (the "Subject Lawsuit") wherein with respect to Arch Elgin sought a declaratory judgment and a judgment for damages against Arch under the Arch Bonds; and WHEREAS,Arch has denied further liability under the Arch Bonds;and WHEREAS,Elgin and Arch have now agreed to settle all remaining issues regarding the Arch Bonds in accordance with the terms and conditions set forth in this Settlement Agreement. NOW, THEREFORE, for and in consideration of the mutual undertakings set forth herein,and other good and valuable consideration,the receipt and sufficiency of which is hereby acknowledged,Elgin and Arch agree as follows: 1. The foregoing recitals are incorporated into this Agreement. 2. Arch shall pay to Elgin within ten (10) days of the execution of this Settlement Agreement the sum of One Million Three Hundred Thousand Dollars ($1,300,000) in full satisfaction of all remaining obligations under the Arch Bonds. -2- 3. In consideration of and upon receipt of the aforesaid payment of$1,300,000 from Arch to Elgin, Elgin hereby completely, fully and finally releases, remises, acquits and forever discharges Arch Insurance Company, its attorneys, agents, contractors, assigns, officers, directors, shareholders and employees,jointly and severally, from all manner of liability or loss, claims, liens, causes of action or demands, of any nature, whether in law or equity, known or unknown,which Elgin now has or may have arising out of or related to the Arch Bonds. 4. Arch for itself, its parent, subsidiary and affiliated corporations, and successors and assigns, and any other persons or entities claiming through Arch, jointly and severally, hereby fully and irrevocably releases and discharges Elgin, its attorneys, agents, contractors, assigns, officials, officers, council members and employees, jointly and severally, from all manner of liability or loss,claims, liens,causes of actions or demands,of any nature, whether in law or in equity, known or unknown,which Arch now has or may have arising out of or related to the Arch Bonds or the Waterford Subdivision. Arch for itself, its parent, subsidiary and affiliated corporations, and successors and assigns, and any other persons or entities claiming through Arch,jointly and severally, covenants not to sue and agrees not to assert any claims, including lien claims, against TRG Venture Two, LLC; or any property owner or party holding an interest in property within Waterford Neighborhoods 1, 2, or 3 with respect to any payments made by Arch with respect to the Arch Bonds. Arch agrees to mutually release TRG Venture Two, LLC in the event that TRG provides a release to Arch containing substantially the same terms as the Elgin release set forth above. Arch reserves the right to assert claims for setoff or contribution against TRG Venture Two,LLC; or any property owner or party holding an interest in property within Waterford Neighborhoods 1,2,or 3 in the event of,and only in the event of, a claim or suit by such parties against the Arch Bonds and that such a claim for setoff or contribution cannot exceed the amount claimed by such parties. - 3 - 5. Elgin agrees to deliver to counsel for Arch the original Arch Bonds within thirty (30)days after the receipt by Elgin of the aforesaid payment from Arch of$1,300,000. 6. Elgin may use the aforesaid payment of$1,300,000,and the payment of$700,000 by Arch for the N2 Bond provided for in the June 2011 Settlement Agreement, in any manner it deems appropriate, and in its sole discretion, with respect to improvements, costs and expenses in connection with the Waterford Subdivision,including but not limited to South Street,and also including but not limited to litigation expenses including attorneys' fees, expert witness fees and other costs associated with litigation in connection with the Waterford Subdivision, which improvements, costs or expenses are not necessarily limited to Neighborhoods 1, 2 and 3, or for any other lawful purposes that Elgin deems appropriate,in its sole discretion. 7. Elgin reserves all rights,remedies and defenses with respect to all claims against Fidelity & Deposit Company of Maryland, including but not limited to, Wetlands Claims, and against TRG Venture Two, LLC, or any other property owner within the Waterford Subdivision and/or their respective successors and assigns. 8. Within three(3) business days of the entry into this Settlement Agreement, Elgin and Arch shall execute a joint stipulation of dismissal of Defendant Arch Insurance Company in the form attached hereto as Exhibit A to provide for Arch to be dismissed as a Defendant in the subject litigation with prejudice and shall request that the Court enter the Agreed Dismissal Order of Defendant Arch Insurance Company in the form of the draft order included in Exhibit A. Elgin and Arch agree that Elgin and Arch shall each bear its own costs, attorneys' fees,and other expenses incurred in connection with the Subject Lawsuit and that the Court shall retain jurisdiction of Arch to enforce this Settlement Agreement. 9. The June 2011 Settlement Agreement between the parties remains in full force and effect. This Settlement Agreement supplements such June 2011 Settlement Agreement. In -4- the event of any conflict between the June 2011 Settlement Agreement and this Settlement Agreement, the terms of this Settlement Agreement shall supersede and control. The June 2011 Settlement Agreement and this Settlement Agreement contain the entire understandings and agreements of the parties hereto with respect to the subject matter hereof. Any purported oral or other written agreements other than the June 2011 Settlement Agreement and this Settlement Agreement which relate to the June 2011 Settlement Agreement and this Settlement Agreement and the matters set forth therein and herein are declared null and void. Any modification of this Settlement Agreement must be made in writing and executed by the parties hereto 10. Any notice related to this Settlement Agreement shall be deemed made if either party emails such notice or mails such notice by first class mail,postage prepaid,as follows: As to the City of El in: William A. Cogley Corporation Counsel 150 Dexter Court Elgin,IL 60120-5555 Tel.: (847)931-5659 Fax: (847)931-5665 email: cop-ley w0,,ci ofel 'n.org With a copy to: Lawrence R.Moelmann Hinshaw&Culbertson,LLP 222 North LaSalle Street Suite 300 Chicago,IL 60601 Tel,: (312)704-3229 Fax: (312)704-3001 email: lmoehnann@hinshawlaw.com -5- As to Arch Insurance: Will Pearce Arch Insurance Group,Inc. 1601 Cherry Street 3 Parkway, Suite 1500 Philadelphia,PA 19102 Tel: (215)606-1577 Fax: (866)455-7099 e-mail:wpearce @archinsurance.com With a copy to: T. Scott Leo Leo&Weber,P.C. One North LaSalle Street Suite 3600 Chicago,IL 60602 Tel.: (312)857-0910 Fax: (312)857-1240 email: sleo @leoweber.com 11. It is understood and agreed by Elgin and Arch that this Settlement Agreement shall be construed without regard to any presumption or other rule requiring construction against the drafting party. 12. This Settlement Agreement may be executed in counterparts. Signatures transmitted by facsimile or e-mail shall have the same legal effect as an original signature. 13. The parties agree that no third party shall have any rights under this agreement. 14. This agreement shall be governed by the law of the State of Illinois. 15. This Agreement may not be assigned by either Party without the written consent of the other Party. Any assignment in violation of this provision will be void. -6- IN WITNESS WHEREOF, the parties have executed this Settlement Agreement this _ day of October,2014. CITY OF ARCH INSU COMPANY By; , � By; City Manager It 5�EH kir c,u 4P-c- L)tt�l/th Attest:` z � cLn G City aerk F:ILegal DcptlAgreemenMettlement Agreement-Arch Insurance-Wetlands-NI bond-clean 10-24-14 w Exhibit.doex -7- EXHIBIT A STIPULATION OF DISMISSAL AND AGREED DISMISSAL ORDER OF DEFENDANT ARCH INSURANCE COMPANY -8 - IN THE CIRCUIT COURT OF THE SIXTEENTH JUDICIAL CIRCUIT KANE COUNTY,ILLINOIS CITY OF ELGIN,ILLINOIS,an Illinois ) Municipal Corporation, ) Plaintiff, ) V. ) Case No. 12 MR 53 ARCH INSURANCE COMPANY,a Missouri ) Judge David R.Akemann Corporation,and FIDELITY AND DEPOSIT ) COMPANY OF MARYLAND,a Maryland ) Corporation and TRG VENTURE TWO,LLC,a ) Delaware Limited Liability Company ) Defendants. } STIPULATION OF DISMISSAL OF DEFENDANT ARCH INSURANCE COMPANY The Plaintiff, City of Elgin, an Illinois municipal corporation, and Defendant, Arch Insurance Company, a Missouri corporation, by their respective counsel, stipulate and agree that Defendant, Arch Insurance Company, be dismissed as a Defendant in this case with prejudice, and that the City of Elgin and Arch Insurance Company shall each bear its own costs, attorneys' fees and other expenses incurred in connection with this case; all claims between the City of Elgin and Arch Insurance Company having been resolved pursuant to a settlement agreement between the City of Elgin and Arch Insurance Company dated October , 2014 ("Settlement Agreement"). This Court shall retain jurisdiction of Arch Insurance Company to enforce the Settlement Agreement. All of the claims asserted by Plaintiff City of Elgin against -9- Defendant Fidelity and Deposit Company of Maryland are fully reserved by the City of Elgin and shall remain pending. CITY OF ELGIN, Plaintiff ARCH INSURANCE COMPANY By: By: William A. Cogley, Corporation Counsel T. Scott Leo City of Elgin Leo&Weber,P.C. 150 Dexter Court One N. LaSalle Street, Suite 3600 Elgin,Illinois 60120 Chicago,Illinois 60602 cogley wncityofel ig_n.org sleoaJeoweber.com One of its attorneys - 10- IN THE CIRCUIT COURT OF THE SIXTEENTH JUDICIAL CIRCUIT KANE COUNTY,ILLINOIS CITY OF ELGIN,ILLINOIS, an Illinois ) Municipal Corporation, ) Plaintiff, ) V. ) Case No. 12 MR 53 ARCH INSURANCE COMPANY, a Missouri ) Judge David R.Akemann Corporation, and FIDELITY AND DEPOSIT ) COMPANY OF MARYLAND,a Maryland ) Corporation and TRG VENTURE TWO,LLC,a ) Delaware Limited Liability Company ) Defendants. ) AGREED DISMISSAL ORDER OF DEFENDANT ARCH INSURANCE COMPANY THIS CAUSE COMING BEFORE THE COURT on the jointly executed Stipulation of Dismissal of the Plaintiff City of Elgin and of the Defendant Arch Insurance Company to dismiss Arch Insurance Company as a Defendant in this case, due notice given and the Court having been advised in the premises,IT IS HEREBY ORDERED: 1. That Defendant Arch Insurance Company is dismissed as a Defendant in this matter with prejudice pursuant to the jointly executed Stipulation of Dismissal; 2. That the Plaintiff City of Elgin and Defendant Arch Insurance Company shall each bear its own costs,attorneys' fees,and other expenses incurred in connection with this case; all claims between the City of Elgin and Arch Insurance Company having been settled pursuant to an October ,2014, settlement agreement("Settlement Agreement"). - 11 - 3. That this Court shall retain jurisdiction of Arch Insurance Company to enforce the Settlement Agreement. 4. That all of the claims asserted by Plaintiff City of Elgin against Defendant Fidelity and Deposit Company of Maryland are fully reserved by the City of Elgin and shall remain pending. ENTER: JUDGE DAVID R. AKEMANN DATE: ,2014. Order prepared by: William A. Cogley Corporation Counsel City of Elgin 150 Dexter Court Elgin,Illinois 60120 One of the Attorneys for City of Elgin - 12-