BISD sues reinsurer for breach of contract

Kelly Holleran Dec. 2, 2009, 1:49pm

The Beaumont Independent School District filed a lawsuit against Employers Reinsurance Corp., claiming the corporation refuses to pay excess workers' compensation benefits to one of the district's employees.

The school district claims it was issued an excess workers' compensation policy in which ERC agreed to protect the school district from paying more than $300,000 in workers' compensation benefits for any claim filed against it.

In October 1993, BISD employee Norma Mitchell was injured while working and filed a workers' compensation claim against the school district, according to the complaint filed Nov. 25 in Jefferson County District Court.

"As of Oct. 13, 2009, BISD had paid $361,646.85 in worker's compensation benefits to or on behalf of Norma Mitchell," the suit states. "Moreover, because the claim remains open, BISD is obligated to continue paying benefits on her claim and will therefore sustain further and increasing damages due to ERC's refusal to fully reimburse BISD for amounts paid in excess of $300,000."

The school district claims it told ERC that Mitchell's claim had reached the excess policy's threshold in March 2004, and by August 2007, BISD sought indemnification from ERC for the amounts it paid over the limit.

However, ERC told the district it intended to assess a 40 percent penalty to the reimbursement claim, the complaint says.

BISD alleges breach of contract, breach of duty of good faith and fair dealing and violation of the Texas Insurance Code.

It is seeking a judgment that ERC breached its contract and its duties of good faith and fair dealing with the school district, a judgment ordering ERC to indemnify BISD for all amounts it paid Mitchell of more than $300,000 and a judgment ordering ERC to fully reimburse the district for all future benefits it will pay to Mitchell.

In addition, BISD is seeking three times its actual damages, plus attorneys' fees, costs, pre- and post-judgment interest and other relief the court deems just.

The school district will be represented by Melody Chappell of Wells, Peyton, Greenberg and Hunt in Beaumont and by John E. Galloway, Les Pickett and James Bailey of Galloway, Johnson, Tompkins, Burr and Smith in Houston.

The case has been assigned to Judge Bob Wortham, 58th District Court.

Jefferson County District Court case number: A185-399.

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