School district wins first round in abuse payment battle

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School district wins first round in abuse payment battle

By BRANDON HONIG bhonig@beaufortgazette.com 843-986-5532
Published Saturday, June 21, 2008 in The Island Packet  |  553 Words  |  news/local

In what was described as "a battle victory in a longer war," a Beaufort County judge ruled Friday that the school district is entitled to more than $6 million in annual insurance coverage against sexual abuse and sexual harassment claims.
School board members cautioned, however, that the district's insurers may appeal the decision in a case stemming from a series of molestations by a former Coosa Elementary School teacher.
The district has paid $4.75 million to settle with seven victims of former teacher Philip Underwood-Sheppard, who pleaded guilty to molesting at least nine students and was sentenced in 2003 to 25 years in prison.
The district's insurers, United National Insurance and the S.C. School Boards Insurance Trust, however, contend all cases of sexual misconduct by Underwood-Sheppard should be handled as a single claim.
As a result, United National Insurance said coverage is capped at $500,000 for sexual abuse and $850,000 for sexual harassment. The seven cases comprised both sexual abuse and sexual harassment claims.
The insurance company also said the county's recovery of money for a sexual abuse claim precluded it from collecting for any sexual harassment claims. United National Insurance said it is liable only for $500,000.
On Friday, Beaufort County Master-In-Equity Marvin Dukes III ruled both insurers must treat each of the seven claims separately. Dukes also ruled the school district can recover money for both sexual abuse and sexual harassment claims.
That means the S.C. School Boards Insurance Trust is liable for $1,050,000. United National Insurance is liable for up to $3 million annually in sexual abuse cases and more than $2.5 million annually in sexual harassment cases.
"Nothing in the language of the endorsements states that the $3 million and $2.55 million figures are inaccessible to Beaufort in the event Beaufort faces more than one claim in a policy year, as it did here," Dukes wrote in his decision. "To the contrary, the endorsements explicitly state that Beaufort has $500,000 and $850,000 in coverage for 'each claim.' "
School board Chairman Fred Washington Jr. said he was "ecstatic, almost" about the ruling, but warned the process is far from over.
"We have to wait and see if they appeal, and we have to try to get it to a court to actually talk about dollars," he said. "It's a good start for us. It's a good foundation. But don't look for a check next week or next month."
Vice chairman Bob Arundell, who is an attorney, agreed it's too early to celebrate.
"It's not a final decision -- it is a battle victory in a longer war," he said. "I think it puts us in a better position than we were in before the ruling, and that's good news for the taxpayers of Beaufort County. Now let's see if we can't carry our banner to victory."
Attorneys and spokespeople for the insurers could not be reached for comment Friday.
After the school district's insurers balked at paying the settlements, the County Council passed a small increase in school operations taxes paired with an equivalent offset in school debt taxes to cover the settlements. Primary home-owners actually saved money on their tax bills. Washington said the taxes that have been collected will be used to relieve school district debt, if the insurers ultimately pay the settlements.