A longstanding dispute between the city of Billings and its insurance carrier could be resolved if the City Council votes Monday to approve a $500,000 settlement.
The dispute grew out of a lawsuit filed against the city and the Police Department in 2006 by Officer Steve Feuerstein.
Feuerstein contended that, among other wrongs, his constitutional right to free speech was violated when his supervisors retaliated against him for reporting that two fellow K-9 officers had mishandled illegal drugs.
In 2007, a jury awarded Feuerstein $1.3 million in damages. The damages, plus $300,000 in legal fees and court costs, were paid by the city's insurer, the Montana Municipal Interlocal Authority.
The MMIA subsequently asked the city to pay approximately $950,000 of the total, saying that some of the four counts that went to trial were not covered by the memorandum-of-coverage document that the insurer and its member cities operated under at the time.
After the city declined to pay the $950,000, the MMIA filed a petition in Helena District Court in 2010, asking the court to force the city to pay that amount.
City Attorney Brent Brooks said the MMIA filed the petition mainly to preserve its standing before the suit became subject to the statute of limitations. The court never even held a scheduling conference, he said.
A staff memo to the City Council said the case "has been mainly dormant since 2010 with periodic informal discussion among the attorneys to determine if a settlement could be reached."
Recently, according to the same memo, a settlement master suggested the $500,000 figure. The staff memo said that the master believed it was a reasonable settlement given "the respective risks that both the MMIA and the City bore in proceeding with contesting the MMIA's case."
Brooks said the MMIA recently approved the settlement agreement, under which it would absorb $1.1 million of the total costs of the lawsuit.
In a recent closed session, the mayor and City Council discussed the risks and alternatives of the proposed settlement with Brooks, City Administrator Tina Volek and two outside attorneys who specialize in insurance coverage.
After that meeting, the council asked to have the proposed settlement placed on a future City Council agenda. It will be put to a vote Monday night.
If the settlement is approved, the city will pay the $500,000 with money it has been saving since the Police Department eliminated one of its two deputy chiefs five years ago.
Police Chief Rich St. John said the position was eliminated specifically in anticipation of having to pay some kind of settlement. The vacancy savings have been transferred each year from the Police Department budget to the property and liability fund.
Volek said that as of July 1, the end of fiscal year 2013, $480,000 had been deposited in the fund, with another $120,000 available this year. So the entire amount of the settlement will be covered by those vacancy savings, she said.
Once the settlement is paid off, St. John said, he hopes the City Council will allow him to use the deputy chief's pay to hire a new police officer.
"I really don't need another deputy chief at this point," he said.