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Alexander Ct-CS071016Mr. Robert E. Hagar Nichols Jackson Dillard Hager & Smith 500 North Akard, Suite 1800 Dallas, TX 75201 Re: Style: Mira Air Development Corp. v City of Copl-7ell Cause #: 07-11511 TML Claim #: 0800140451 Dear Mr. Hagar: The above - referenced lawsuit was forwarded to the Risk Pool for handling in accordance with the terms of the Interlocal Agreement. We have determined that some of the allegations potentially seek damages covered under the Errors and Omissions Liability Coverage effective October 1, 2006, and have retained the law firm of Taylor Olson Adkins Sralla & Elarn to provide the City with a defense. As we discussed, the allegations are vague and it is not clear whether the Risk Pool has a duty to defend this suit. The Risk Pool's obligation to provide a defense is created by the following provision of the Liability Coverage Document: PA I GENERAL CONDITIONS I. DEFENSE The Fund shall have the right and the duty to defend any suit against the Member or Covered Party seeking damages on account . of such liability , as -covered in this Plan, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit it deems expedient. (emphasis added) The Plaintiff is a developer that alleges that the City is responsible for the extra costs it has incurred in connection with delays due to outdated flood plain maps and the City's insistence that it provide unnecessary engineering reports. The Plaintiff also alleges that additional requirements the City imposed as a condition of approving the development plan violate the - rough proportionality" requirement imposed by the Texas Constitution and refers to Art. 1. § 17 of the Texas Constitution. That provision is the basis for compensation for acts of eminent domain. It also alleges that the hearing before the City Council to review the chaiiges imposed by the City's staff' did not provide Sufficient "due process." The Petition does not identi the EX�S MU. UCIIAi- IN RISK 82 Rutbciftsrd Uwe, F104V • Aii'll ."-;n, Tk.,: K.N - :51 -t9j Only RESERVATION OF RIGHTS LETTER Mr. Robert E. Hagar October 16, 2007 Page 2 legal causes of action under which the Plaintiff is seeking damages. The allegations raise the possible applicability of the following definition and exclusion contained in the Liability Coverage document: PART 11 DEFINITIONS Whenever the following words or phrases appear throughout the Plan, they are defined as follows: P. DAMAGES means monetary Ljqd lmcnt, award, pl interest thereon or settlement, but does not include lines, civil penalties, of whatever kind or nature, damages for which insurance is prohibited by law, or attorneys' fees unless those attorneys fees are awarded in connection with a. covered damage. PART VIII EXCLUSIONS APPLICABLE TO ALL COVERAGES Unless otherwise provided in the Agreement Declarations, Linder specific coverages or by endorsement, the self-insurance provided in this Agreement does not apply to or provide coverage for the following: T. Claims or suits based upon the operation of the principles of emillent domain including condemnation proceedings or inverse condemnation by whatever name called, whether such liability accrues directly against the Member or by virtue of any agreement entered into by or on behalf of the Member; X. Claims or suits against the Member or Covered Party which do not seek civil damages or monetary relief other - t - - --co_sls of court or altorpqy5L[ces for prosecuting the Suit, Such as, but not limited to: criminal prosecutions and proceedings; election contests; actions for injunctive or declaratory i.gd �mei2ts- actions to enforce or invalidate ordinances, City charter provisions or code provisions; actions specifically to enforce or invalidate contracts with the Member or go between the Member and others; actions by government agencies against the Member or Covered Party to require compliance with applicable law or regulation; and actions by any person seeking exemption from applicable ordinances or regulations of tile INIember, except claims or suits filed with the Equal Employment Opportunity Commission or the Texas Commission on Human Rights shall not be excluded. (emphasis added) The Risk Pool does not cover stilts seeking damages under Art. 1. § 17 because of Exclusion T. The Risk Pool Would not cover a declaratory judgment action, or any attorriev's fees awarded to T, NIN I L RFSERVAnON 0FRI(;I ITS LVITER Mr. Roberi E. Hagar October 16. 2007 Page 3 the Plaintiff because of the definition of "damages" and Exclusion X. As discussed, the allegations are vague as it is not clear whether the Plaintiff is seeking damages other than compensation for an act of eminent domain. Although the Risk Pool is providing a defense. it reserves the right to deny coverage for any monetary award which is not within the definition of - damages." or which is otherwise excluded by Exclusions T and X above. The Risk Pool's duty to provide a defense is determined by the live pleadings. The Risk Pool will continue to provide a defense so long as the allegations seek damages covered by the Risk Pool. There is the possibility that the allegations seeking covered damages will be disposed of through amended pleadings or pre-trial motions, leaving only a claim for declaratory relief and attorneys' fees and/or compensation for an act of eminent domain, The Risk Pool, therefore, must reserve the right to withdraw its defense at any time it determines that the Plaintiff is 110 longer seeking covered damages. In view of the coverage questions involved in this case and the fact that the Risk Pool is defending the City Linder a reservation of rights, the City may wish to seek the advice of an attorney, at its erpense, regarding the Risk Pool's obligations to the City as a Covered Party and its handling of this suit. If the City retains an attorney for that purpose, please have him or her contact Taylor Olson Adkins Srala & Elam for whatever information he or she might desire. If we do not hear from you to the contrary, we will assume that the defense we are providing and the conditions we have outlined are acceptable to the City and will continue to defend under those terms. We look forward to working with the City toward the defense of this Suit. Please feel free to call if you have any questions concerning coverage. Sincerely, Richard Evans Staff Attorney RE/ma cc: /Mr. Vivyon Bowman, Director of HR-Admin/Fund Contact, City of Coppell. P.O. Box 9478, Coppell, TX 75019-9478 Mr. Wayne Olson, Defense Counsel, Taylor Olson Adkins Sralla & Elam, 6000 Western Place, Suite 200, Fort Worth, TX 76107-4654 CERTIFIED MAIL, RETURN RECEIPT REQUESTED NO. 7004 1350 0002 7264 2872 (jAivimvk)rd',eVaj1s4mirj mardevelopnicnt-coppoi 101607-dvc AM"