As LAUSD battles insurers, taxpayers left with bill for teacher sex abuse settlements

When the Los Angeles Unified School District reaches a settlement with victims who experienced sexual abuse in its schools, who pays? Or, more to the point: who should pay?

L.A. Unified officials contended their insurance policies should've covered the $200 million it cost to settle abuse cases from Miramonte Elementary School in 2014. Last year, the district sued 27 insurance companies that L.A. Unified believes "abandoned the school district, forcing it to defend itself and utilize its own much needed resources" to mount a defense and settle the cases.

Now, on the heels of another $88 million settlement with victims from De La Torre and Telfair elementary schools, district officials said they have gotten no indication that their insurers intend to participate in those settlements either — meaning, once again, taxpayers could end up on the hook.

"We’re asking [LAUSD's insurers] to participate in the eventual payout for those settlements," said Greg McNair, chief business and compliance counsel for L.A. Unified. "They have not agreed to do so as of yet. If they don’t soon agree to do so, we will file lawsuits against those insurers, just like we filed lawsuits against the insurers for the Miramonte lawsuit."

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But in their own court filings related to the Miramonte case, one of the district's insurers argued it's not clear the policies they sold to L.A. Unified cover the district's settlement costs.

In their own 2013 lawsuit, Everest National Insurance Company questioned whether the costs L.A. Unified incurred in settling the Miramonte cases exceeded their "self insured retention" — roughly analogous to the deductible on an auto or homeowner's policy — of $5 million. (Exceeding that "deductible" through either defending or settling the case, McNair said, triggers the insurance coverage.)

L.A. Unified asserted that it exceeded that amount in 2012 by replacing all faculty and staff at Miramonte following the two suspected abusers' arrests. But Everest attorneys dispute this, writing in their court filing that L.A. Unified never provided sufficient clarification to make it clear they had exceeded the self insured retention amount.

As the insurance company's attorneys wrote, Everest "disputes that there is any coverage under the Everest policies for the underlying claims" in the Miramonte case.

With the legal dispute dragging on — the next court date isn't until August — the district has had to pay Miramonte settlements out of its general fund.

"The insurance companies have deprived the district of its ability to use this money in the classroom by their failure to live up to their obligation to provide insurance for these incidences," McNair said.

Settlements in abuse cases are generally paid out in a lump sum, McNair said; if the victim is young, the settlement typically covers the cost of an annuity. In the most recent high-profile cases, the district has paid out into a qualified settlement fund for victims, he said. A retired judge then oversees the disbursement of money from that fund.

For decades, the district has had several layers of insurance coverage that would handle liability claims, with each policy generally covering a one-year timespan. In a sexual abuse case, the year in which the abuse occurred determines which policy would, in theory, cover the claim.

L.A. Unified paid roughly $5.4 million in premiums on insurance that would cover abuse cases during the 2015-16 school year.