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Settlement Reached In Complex MGM Hotel Fire Insurance Case

April 1, 1985 GMT

LAS VEGAS (AP) _ A $76 million settlement was announced Sunday in a lawsuit stemming from the fatal MGM Grand Hotel fire, avoiding a complex trial involving 63 insurance companies.

The hotel had sued its insurance carriers after the companies refused to reimburse the hotel for $75 million it had agreed to pay in settlement of claims from the fire. Eighty-seven people were killed and hundreds injured in the Nov. 21, 1980, blaze.

The insurance companies countersued, arguing that the resort hotel had settled too early and for too much money with the 1,357 plaintiffs who had filed suit against the hotel following the disaster.

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Alvin Benedict, chairman of the board and chief executive officer of MGM Grand Hotels Inc., said in a prepared statement that he was pleased by the settlement.

The only major lawsuit that now remains from the fire is the hotel’s $90 million property damage suit against the Kemper Insurance Co. and another carrier.

According to the terms of the settlement, which is to be reviewed by the court for approval, the insurance companies will pay the hotel $67 million on April 15, 1985. A balance of $9 million is to be paid in two installments at 12 percent interest in 1986 and 1987.

The settlement was announced just three days before the trial was scheduled to begin before Judge Paul S. Goldman of the 8th Judicial District Court of Nevada, who has presided over this massive litigation since March 1983.

The hotel was insured for $30 million at the time of the fire. After the fire, the MGM Grand bought an unusual $170 million retroactive policy from Frank B. Hall, who represented a group of insurance carriers.

The carriers reimbursed the MGM Grand for about $11.5 million to cover individual claims filed by victims and their families.

But complications arose after the insurance companies backing the retroactive policy refused to pay for a $75 million settlement the hotel reached with the remaining plaintiffs two years after the fire.

The $75 million sought by the hotel was part of a $167 million settlement offered to 1,357 plaintiffs. The remaining $85 million was to be paid by contractors and others involved in the design and construction of the resort hotel.

Dozens of lawyers have been sifting through millions of pages of documents stored at a basketball arena at the University of Nevada-Las Vegas campus.

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It took two weeks to select a jury for the trial, and opening arguments were scheduled to begin Wednesday.

When jury selection began two weeks ago, Nevada Supreme Court Justice Charles Springer predicted the insurance trial could be the longest and most complex in judicial history.

Goldman predicted a trial could run five to 14 months and that legal costs and attorneys fees for the case would be $342,000 a day.

Benedict said litigation costs in the case last year just for MGM Grand Hotels was estimated at $5 million, which significantly lowered the company’s profits.

Goldman said in a prepared statement that he also was pleased that the parties were able to reach a settlement.