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County Settles Lakeside Heights Lawsuit

After nearly 4 years of uncertainty, the Lake County Board of Supervisors has reluctantly settled the lawsuit brought against the County by the Lakeside Heights Homeowners.  The Lakeside Heights Homeowners Association, together with property owners, filed the suit in November 2013, alleging that the County’s infrastructure was the cause of the known landslide in the area.

The County became aware of the land movement in Spring 2013 when its water and sewer infrastructure was threatened.  At that time, several private structures and residences in the area had also been damaged or destroyed and Hill Road East was partially blocked by the landslide.

Originally, 46 Lakeside Heights property owners claimed damages against the County in the amount of $5 million dollars each, all totaling $230 million.   However, while still devastating to the County’s strained financial resources, settlement has been reached for $4.5 million, to be paid by the County to the homeowners within 90 days.  While it remains the position of the County that neither its water or sewer system caused to the landslide, if it was determined at trial that the County was liable under the theory of inverse condemnation, the presence or absence of fault by the County would be completely irrelevant.

As is well known throughout California and the nation, during the summers of 2015 and 2016, Lake County suffered severe wildfire disasters, with 22% of the County’s total land mass burned and thousands losing their homes.  As a result of these unprecedented disasters, the County has been especially challenged, now and in the future, due to its obligation to fund recovery efforts with partial state and federal reimbursement in the wake of the tremendous loss to its property tax base.  Further, the County has had to face the same harsh actuality as the property owners in Lakeside Heights:  Damages due to subsidence are generally excluded from insurance coverage, which means no insurance monies are available to draw upon.

Given this reality, the County intends to seek outside financing, in the form of a loan or loans, in order to pay the Lakeside Heights settlement.  According to County Administrative Officer Carol Huchingson, “Unlike many local jurisdictions, the Lake County is not accustomed to meeting its obligations with loans but we are gearing up to do just that for the Lakeside Heights matter.”

In 2016, the Board received a loan from California State Association of California - Excess Insurance Authority (CSAC-EIA) in the amount of $750,000, intended to cover a portion of the cost of legal defense.

Huchingson added, “Our Board’s decision to settle the lawsuit is not an admission that the claims of the Lakeside Heights property owners are true.  Rather, it is recognition of the risks of trial, and the Board’s balancing of the interests of all its constituents, given the uncertain outcome of protracted litigation, which could have been so much worse.”