Insurance will cover some costs of lawsuits against District 834

After an initial denial of claims by its insurance company, the Stillwater Area Public School District has learned insurance will cover some of the costs related to lawsuits over planned school closures. After further investigation, the district’s insurance carrier has decided to cover up to $500,000 in legal costs to defend the district against three lawsuits filed after the board voted to close Marine and Oak Park and Withrow elementary schools.

In a March 7 email, Sandra Widder of insurance provider Gallagher Bassett Services originally informed the district that its insurance policy underwriters would not cover the costs of the three lawsuits — one brought by parent Melissa Douglas and two by the nonprofit 834 Voice. In the email, Kevin Thommes from Brit Global Speciality, the underwriter, said the district’s policy would not cover the claims because the lawsuits were not asking for monetary damages and only for declaratory, administrative or injunctive relief.

“As the petition only seeks non-monetary damages … there is no coverage provided by Underwriters,” Thommes wrote.

As of Sept. 12, legal bills related to school closure lawsuits totaled a little more than $118,000. It was initially believed these costs would be paid for by the district’s general fund — the same fund that pays teacher salaries and other expenses.

Kristen Hoheisel, executive director of finance and operation, told the school board Oct. 27 that she has been working with the insurance provider to cover legal costs. On Oct. 17, Hoheisel received a letter from Brit Global Speciality that revised its previous opinion and stated that it would provide coverage.

“They do now acknowledge and our agent also said, simply written it would have been, ‘I’m sorry, there is coverage and we made a mistake,’” Hoheisel said.

In the letter, the underwriters acknowledge that after further review, it “initially did not take into consideration an applicable endorsement.”

The district will still be required to pay some fees related to the lawsuits. Hoheisel told the board that legal expenses incurred in the defense of the Douglas lawsuit and the two suits brought by 834 Voice are packaged into two claims instead of three and will be subject to $15,000 deductibles for each and limits of $250,000 each.

“While they are separate in court, our insurance is viewing them as one claimant,” Hoheisel said.

If costs related to both 834 Voice lawsuits exceed $250,000, the district will be required to pay costs above the limit. The Douglas case was dismissed in district court Aug. 30.

“While some will interpret this as some sort of conspiracy, I think that is great news,” board member Tom Lehmann said. “It’s not uncommon for an insurance company to deny initially, and after some investigating … to say they will cover claims like that.”

Lehmann did temper his reaction later.

“The bottom line is they are paying for it, we are all paying for it. Our rates are based upon our claims,” Lehmann said. “To say this is a win is somewhat misleading, it will certainly help with the finances of the district.”

Contact Alicia Lebens at [email protected]