Torrance Settles With Insurer for $3.5 Million : Lawsuit: The insurance firm originally refused to cover Torrance in a judgment against the city for a 1984 traffic death involving a police officer.

Torrance officials Wednesday accepted a $3.5-million settlement from their insurance carrier, which previously had refused to cover legal judgments against the city that could ultimately cost Torrance almost three times that amount.

Noting that Protective National Insurance Co. of Omaha is in desperate financial straits, City Atty. Kenneth L. Nelson said late Wednesday that the settlement terms are the best the city could get, and that it puts Torrance ahead of other creditors of the debt-ridden insurer.

On receiving the $3.5-million check, the city immediately took it to the bank, Nelson said.

Torrance Mayor Katy Geissert said she was relieved to get the money. “It was in the city’s best interest, really, to settle for a substantial portion of the judgment against the city rather than holding out for the full amount,” Geissert said. “I assume the check is good. I certainly hope so.”

Nelson said he is not fully satisfied. “We wanted more but it ain’t there and I’m convinced we got as much as we could get, and I think we got it only because we vigorously went after them. They had a lot of other lawsuits against them.”

However, Bob Baker, a Santa Monica-based attorney for Protective National, said company officials also are not happy with the settlement because the insurer believes it is not liable for the city’s losses stemming from a widely publicized judgment against the Torrance Police Department.

The settlement “is based on what I believe was an erroneous opinion by the judge in January . . . that (the city) was covered,” Baker said. “The city wanted us to pay off a lot more. When they got down that figure ($3.5 million), the matter was settled.”

The city filed suit in Superior Court against Protective National last June, charging the company with breach of faith, breach of contract and fraud for refusing to pay the judgment.

A Los Angeles Superior Court jury in 1989 ordered the city to pay $5.6 million to John Rastello of San Pedro, whose 19-year-old son, Kelly, died in a 1984 traffic collision with off-duty Torrance police Sgt. Rollo Green.

Jurors ultimately found that the Police Department covered up for Green, who had been drinking before the accident, by delaying a field sobriety test for more than an hour and by failing to measure Green’s blood-alcohol level. The jury also concluded that the cover-up followed a Police Department “custom and policy” of condoning misbehavior by officers.

The judge in the case later ordered the city to pay an additional $2.1 million to Rastello’s attorneys for fees and expenses.

The city has appealed the $5.6-million judgment. The attorneys for Rastello, who wanted roughly $4 million in fees, have appealed the judge’s decision in that matter. With interest accruing at 10% while the appeals are pending, the city ultimately could owe more than $9 million in the case, attorneys said.

Torrance’s attorneys charged that Protective National, over the city’s protests, repeatedly rejected settlement offers made before, during and after the trial that would have cost the city far less money.

Two weeks after Protective National rejected an offer by Rastello’s attorneys to accept $7.5 million to end the case, insurance officials told the city they would not pay any of the judgment.

The company, which paid $2 million to defend the city during the trial, said it based its decision not to pay on the jury’s verdict that the Police Department and the officers had committed intentional acts, noting that Torrance’s $20-million policy covered only accidents.

Torrance’s attorneys maintain that the acts were not intentional, and argued to Los Angeles Superior Court Judge Stephen E. O’Neil in January that Protective National never issued a mandatory document reserving its rights not to pay at the outset of the case.

O’Neil ruled that Protective National must pay.

“We contended that the city had unclean hands, that they had covered up even from their lawyers that they had a course and pattern of conduct of illegal police activity,” said Baker for Protective National. “That’s why we believe the judge’s ruling was erroneous.”

Nelson said Torrance accepted the discounted settlement from the insurer only because it had become clear in recent months that Protective National has little money to give. Nebraska state records showed that, as of Sept. 30, the carrier had liabilities of $97.1 million, but only $89.5 million in assets.

With Wednesday’s payment, Nelson said, settlement discussions with Rastello’s attorneys now can go forward in earnest.

“We’re going to spend whatever time is necessary to settle,” Nelson said. “I really want to settle it, but if we can’t arrive at a number . . . we’ll go forth with the appeal.”