A commercial division judge has ordered mediation for the parties embroiled in an insurance coverage battle over a preparatory school’s decision to settle sexual abuse allegations with two former students.
Justice Charles Ramos (See Profile) on Thursday suggested to parties in Horace Mann School v. Granite State Insurance, 652752/2013, that the case may not have the legs to require further litigation.
“I don’t think there’s a great deal in this case you don’t already know,” he said. “It’s all about money. You’re in the Commercial Division. This is not matrimonial.”
Ramos’ directive came at the end of hour-long arguments on cross-motions for summary judgment in an insurance dispute arising from decades-old events.
AIG and subsidiaries Granite State Insurance and New Hampshire Insurance have refused to indemnify the elite Bronx preparatory school for $1.05 million in settlement costs reached with the two students in 2012.
In contention is when the school’s board of trustees’ first had the duty to report notice of a claim to the insurers and the scope of a confidentiality agreement barring the insurers from using any information from mediation talks between the school and alleged victims for future litigation.
Ramos told the parties during a private bench conference Thursday it “only takes one trustee” to be aware of the allegation to trigger duty to notice the insurer.
Identified in court as “John Doe 1″ and “John Doe 2,” the former students were among 32 individuals with whom Horace Mann reached a settlement following an explosive New York Times Magazine article in June 2012 that reported a pattern of abuse by faculty and administrators between 1962 and 1996. The school later issued a public acknowledgment and apology.
Ruling from the bench, Ramos denied Horace Mann summary judgment on its claims for declaratory judgment and breach of contract, privately telling the parties afterwards the insurers had “some good defenses.” The judge reserved ruling on the insurers’ cross-motion before sending the parties to mediation.
A third-party neutral mediator is meant to help the parties move towards some sort of settlement. The case, including any future rulings, won’t be suspended in the meantime.
Howard Epstein, a partner at Schulte Roth & Zabel, argued for Horace Mann. Mark Sheridan, partner at Patton Boggs, argued for the insurers.
Prior to oral arguments, Ramos briefly addressed Patton Boggs’ motion to recuse the judge, a 1959 alumnus of Horace Mann, to avoid any speck of bias given the high-profile nature of the case.
The motion was withdrawn without objection after the judge informed the parties that he would willingly remove himself if either side lacked confidence in his ability to be impartial, adding, “As far as I’m concerned, this is just a commercial case.”
“They don’t actually remember you,” Epstein told the judge, who jokingly replied that he was the “worst alum” the school had seen.
During oral arguments, defense counsel pointed out to the court that one of the John Does notified the school of inappropriate conduct by a faculty member on Sept. 29, 1993, triggering the school’s duty to notify the insurer of a liability claim well before its 2012 submission.
Epstein argued that this communication did not amount to notice of a claim, just “merely complaints, if you will.”
“They waited 25 years to tender this to us,” Sheridan responded.
AIG also contends that the school’s private settlement with students was reached without the insurer’s participation or consent. Horace Mann countered that while AIG was invited to the talks, it refused attendance due to a refusal to sign a confidentiality agreement that all other insurers involved in the process voluntarily signed.
Sheridan argued the stipulation was overly restrictive, prohibiting it from using any information for future litigation or to establish a “coverage position.”
Noting that this was “not an unreasonable request,” Ramos pointed out to Epstein, “You were putting restrictions on this information.” He added that while it was clear counsel was trying to protect the school, “You were putting conditions on this for reasons of your own.”