East Ramapo School District in Nasty Fight With Its Insurance Company

BY JOEL GROSSBARTH

The embattled East Ramapo School District has been entangled in a nasty legal fight with its own insurance company. The fight has culminated in a decision recently handed down by an appellate court in Brooklyn.

In East Ramapo Central School District v. New York Schools Insurance Reciprocal, the insurance company issued a policy of insurance to the school district that provided coverage for claims made against the school district for “wrongful acts in the performance of duties” by the district.

While the policy was in effect, a class action lawsuit was instituted against the school district in federal court alleging that current and former members of the school district’s board of education engaged in numerous schemes to siphon off public money to support private religious institutions in various yeshivas, forcing a large cut in instructional programming in public schools to a degree that the right of public school children to an education was impugned. The insurance company disclaimed coverage claiming the acts alleged in the class action suit fell outside the scope of what the insurance policy covered.

Initially, the Supreme Court in Nassau County held that the insurance company was obligated to defend the school district and ordered it to pay $187,500.00 to the school district. On appeal, the Appellate Division, Second Department reversed and held it was error for the lower court to enter judgment since the acts alleged in the class action lawsuit were intentional acts and the school board intentionally engaged in a scheme to illegally fund religious activities and institutions. The Court held that the alleged acts were not covered in the actual policy of insurance.

However, the appeals court did allow the school district to engage in discovery relating to the claim that the insurance company acted in violation of its contractual obligation to act in good faith and fair dealing. The matter was referred back to the Nassau County Supreme Court for further proceedings.  In essence, while the case may look bleak for the school district, all is not lost. The school district may have one last bite at the legal apple, but it will cost more money for the lawyers. Rather, the money should go to the children of the school district.