Recently filed court papers allege that an elite college preparatory school was more interested in protecting its reputation than abiding by insurance policy coverage requirements in the wake of a major expose detailing sexual abuse at the school.
Several insurance companies contend they have no legal obligation to reimburse Horace Mann for the more than $1 million in costs incurred from settling with two former students of the school who allege they were molested by faculty 20 years ago.
The Bronx school sued for breach of contract against Granite State Insurance Company, New Hampshire Insurance Company and AIG Claims last August after the companies denied coverage of the claims.
The school found itself in the harsh limelight after The New York Times Magazine in June 2012 published a lengthy account by a former student detailing a long history of sexual abuse at the school by teachers and coaches. The school later issued a public apology and acknowledged a pattern of abuse that occurred between the years 1962 and 1996.
The June 6, 2012 magazine account prompted as many as 30 former students to come forward and seek recourse from the school, according to the complaint in Horace Mann School v. Granite State Insurance, 652752/2013, assigned to Manhattan Supreme Court Justice Charles Ramos. The school eventually settled with 27 alumni following private mediation.
The August 2013 complaint involves the settlement payments for two of those former students, one of whom, according to court papers, had committed suicide. They are identified in court papers as “John Doe 1” and “John Doe 2″ and sections are heavily redacted.
The insurance companies assert that the costs were incurred during a “quick, quiet, and unapproved settlement” of “entirely defensible underlying claims for significant sums.”
“It is beyond dispute that Horace Mann was not ‘legally obligated to pay’ the Underlying Claims. No court or jury adjudicated Horace Mann’s liability regarding the Underlying Claims. Indeed, a lawsuit was never even filed against Horace Mann. Nor was there a reasonable settlement to which the Member Companies’ consented,” the insurers’ motion for summary judgment to dismiss the complaint states.
The insurance companies also assert they were not given the chance to investigate the veracity of the claims for insurance litigation purposes.
“Instead, Horace Mann demanded indemnification from the Member Companies so that it could pay the claimants without incurring any adverse publicity that might harm its reputation. The Policies contain no such obligation. The Member Companies are not the guarantors of Horace Mann’s reputation,” the companies stated.
The motion alleges that Horace Mann insisted on “sweeping confidentiality” provisions as condition for the companies’ attendance at mediation.
The motion also argues that under New York law, the liability insurer should be allowed some “control” over mediation proceedings “as a precondition to any duty to indemnify.” Anything otherwise, it claims, would “invite collusion between putative claimants and the insured, potentially forcing insurers to indemnify matters for which there is no actual legal liability but simply a desire to preserve a business relationship or to avoid adverse publicity.”
In its complaint, Schulte Roth & Zabel, counsel for Horace Mann, said no other insurance carrier involved in mediation demanded copies of such confidential materials as AIG, the claims administrator in this action.
The policies, collectively, were active from 1992 through 1996 with combined limits of $8 million for liability for bodily injury including injury from sexual abuse.
Mark Errico, a partner at Patton Boggs who represents the insurance companies, could not be reached for comment.