The Kalispell City Council on Monday approved a deal settling a lawsuit Montana Diamond Aire filed against the city in 2004.

Kalispell won’t have to pay any money out of pocket to wash its hands of the longstanding legal fight.

Instead, city officials are entering a $1.5 million-dollar consent judgment that gives the business “all rights and courses of action” for a bad-faith claim against an insurance company that refused to defend Kalispell against the lawsuit.

“Montana has particularly strict bad-faith laws that apply against insurance companies who don’t follow contracts,” Kalispell City Attorney Charlie Harball said.

“We have a carrier who was saying, ‘No, we don’t have to cover that,’ while others did. So there is a potential bad-faith claim the city would have against the insurer.”

Montana Diamond Aire owner John Talmage will be able to pursue that claim and potential payout in federal court with the city’s blessing and cooperation.

Kalispell City Manager Doug Russell and Mayor Tammi Fisher arrived at the terms last

week with Talmage and his attorneys.

The proposed terms were not released before Monday night to prevent the company — Ace Insurance — from deciding to change course and defend the city, possibly scuttling the bad-faith claim and settlement.

“The net result for taxpayers out of pocket is nothing,” Fisher said. “That is a significant win for the city of Kalispell for litigation ongoing for 10 years. I see this as a positive for the city and removing what could be a significant liability.”

Talmage filed the lawsuit after city officials fenced his airplane modification and fueling business off from the city airport with a rolling gate he argued provided inadequate access.

The lawsuit alleged unreasonable interference with use of an easement, wrongful interference with business relations and inverse condemnation. It also asserted claims against Airport Manager Fred Leistiko for slander and interference with business relations and sought punitive damages against the city.

The case was scheduled for jury trial in August. But trial dates had been repeatedly pushed back as the case dragged on through several city managers and two full four-year terms of the Kalispell City Council.

Council member Bob Hafferman said he’s glad to see the lawsuit coming to a close.

“It’s been hanging fire for 10 years. I think it speaks well for the city manager that handles things in a quick manner instead of letting things drag on and on and on,” Hafferman said. “I don’t see any downside. It looks to me like they’ve done a good job of providing protection for city residents.”

A $130,000 cash payment due to Montana Diamond Aire will be covered by Kalispell’s insurers. Other terms in the settlement waive past airport user fees Talmage contested, lift a city deed restriction that limited Talmage’s property to aviation uses, let Talmage remove the fence the city put up and reinstall a sign for his business along the airport runway.

In exchange, Talmage agrees not to try to execute the $1.5 million judgment against Kalispell.

Harball noted that the city is not admitting any wrongdoing as part of the settlement.

“It was an opportunity to get it settled without going to court and having the possibility of a jury going south on you and ending up paying damages,” Harball said. “It gets it done without spending money and finally puts it to bed. This is going on for a long time now. And he was facing risk, too. He could have gone to trial and gotten nothing.”

Talmage said he wanted his day in court and to go before a jury, but he also wanted to find a way to get the lawsuit settled without hurting taxpayers any more. Over the last nine years Kalispell has spent about $65,000 defending itself in the case. That tally could grow to $75,000 by the time everything is wrapped up, city officials have estimated.

“They agreed to what my damages were as long as they don’t have to pay it,” Talmage said. He added that a new business sign for the airport runway is already in the works and that the contested fence should be gone soon. “We’re going to pull the fence out tomorrow, have a trash-the-fence grand reopening. It’ll be fun.”

Talmage said he will pursue the bad-faith claim. “And it may work, it may not work. I don’t know. My lawyers are pretty confident,” he said.

Reporter Tom Lotshaw may be reached at 758-4483 or by email at tlotshaw@dailyinterlake.com.