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Summit County sued by its insurer

Summit County is being sued by its own insurance company, which claims the insurer is not responsible for paying to defend or indemnify county officials in a long-running legal dispute with the private Summit Water Distribution Company.

Taxpayers could be on the hook for pricey litigation costs if the Utah Local Governments Trust prevails in the case.

Defendants include Summit County, the Summit County Commission, the county’s Mountain Regional Water Special Service District, the Montgomery Watson Harza firm and William Todd Jarvis, who was an independent contractor with the county. The Utah Local Governments Trust provides liability insurance for Summit County and Mountain Regional Water Special Service District.

The insurer claims the conduct alleged by Summit Water in an antitrust lawsuit against the county "does not fall within the coverage provisions of the insurance policies."

The wrangling between two of the largest water companies in the county dates back to 2000, when Summit County formed its Mountain Regional Water Special Service District and began competing with Summit Water on the West Side.

At issue is whether government officials abused their power by conditioning development approvals on a builder at Promontory agreeing to buy his water from Summit County.

Newspaper comments Promontory developer Rich Sonntag made in 2002 showed that he was coerced into signing up with Mountain Regional after Summit Water offered to beat the county’s price, attorneys for Summit Water claim.

The county, a few years ago, lost an argument before the Utah Supreme Court, which ruled unanimously that a judge in a lower court had erred in dismissing the antitrust case. The lawsuit was sent back to 3rd District Court in Summit County where it remains active today.

Meanwhile, Summit County Attorney David Brickey said the Utah Local Governments Trust agreed to cover the county’s litigation costs in the dispute when the government purchased insurance from the private firm about a decade ago.

The insurer is now trying to shirk that responsibility by suing the county in 2nd District Court in Farmington, Brickey said.

"This is a version of your own teammate throwing an inside pitch at you," Brickey said in a telephone interview Friday. "This is a teammate who has decided to throw a pitch right at my head."

His agreement with the Utah Local Governments Trust means "the trust has an obligation to continue to defend the cases they start," Brickey said.

"They’ve represented us for several years now," he added.

According to the lawsuit, the insurance company agreed to pay to defend Summit County in cases where public officials made "errors or omissions."

Those do not include "malfeasance," the lawsuit states.

"The term ‘malfeasance’ is defined as ‘illegal conduct or the performance of an act outside the official duties of the insured,’" according to the lawsuit.

By tying development approvals to the purchase of water from Summit County, government officials violated state antitrust laws, which aim to prevent formations of monopolies, Summit Water claims.

"The alleged intentional anticompetitive conduct of Summit County, Mountain Regional, Montgomery Watson and Jarvis constitutes ‘malfeasance,’" the insurer claims in its lawsuit.

The insurance policy does not cover malfeasance committed by county employees, states the 14-page complaint filed May 11 by the Utah Local Governments Trust.

Additionally, a failed attempt by the county about a decade ago to condemn Summit Water Distribution Company further excludes the insurance coverage, the lawsuit states.

Liability that arises "in connection with the principles of eminent domain" is excluded from coverage, the insurer claims.


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