Insurer disputes Olympia Early Learning Center payouts

jpawloski@theolympian.comApril 13, 2013 

The now-defunct Olympia Early Learning Center’s insurer is disputing the value of a $24.5 million settlement agreement for five civil lawsuits filed by families of a child who was raped and four pupils who were allegedly molested by former teaching assistant Eli Tabor.

A “reasonableness hearing” to determine the value of the settlement agreement will be scheduled this spring before Thurston County Superior Court Judge Erik D. Price.

The now-settled civil lawsuits had alleged that the center and its former employees were liable for damages for the child rape and alleged acts of child molestation committed by Tabor.

In 2011, a Thurston County Superior Court judge sentenced Tabor to 18 years to life in prison for raping a 5-year-old pupil in the child’s home and molesting a 4-year-old pupil at work. In 2011, the learning center closed both its downtown branch on Capitol Way and its other site on McPhee Road. Tabor had worked at the McPhee Road site from May 2008 to January 2011, when the allegations that he had sexually abused a pupil came to light.

In September 2012, Tacoma attorney Darrell Cochran, acting on behalf of the five families who filed civil lawsuits against the learning center, reached settlement agreements with the learning center and its former employees named individually as defendants.

Attorneys for the learning center, and the individual learning center defendants, including former learning center executive director Steve Olson and former learning center program director Rose Horgdahl, signed “confessional judgments” admitting fault, as part of the settlement, according to court documents. They also agreed to stipulate to settlement amounts totaling $24.5 million, court papers state.

As part of those agreements, Cochran offered the defendants a deal, or “covenant” agreement, that prevented his clients from ever obtaining any of the settlement money from the learning center, Olsen or Horgdahl, court papers state. In exchange for admitting fault, Cochran agreed not to execute the settlements against them, but agreed to assign the claims to the learning center’s insurer, Philadelphia Indemnity Insurance Co.

“The only party that may ever be required to pay any portion of the $24.5 million stipulated settlements is Philadelphia,” court papers state.

Cochran said that Philadelphia Indemnity is ultimately responsible for paying the full $24.5 million to his clients.

One of Philadelphia Indemnity’s attorneys, Tyna Ek of Soha & Lang in Seattle, said she has seen no evidence that the $24.5 million sum is “reasonable.”

Ek also said the burden of proving the settlement agreement’s reasonableness falls on Cochran. She also said the center was insured by Philadelphia Indemnity for only $1 million.

In an email Thursday to The Olympian, Ek said:

“Washington courts allow parties to a lawsuit to agree to stipulate to a judgment in any dollar amount they wish. However, the Washington Supreme Court has cautioned judges to carefully scrutinize settlements whenever the person agreeing to the settlement receives a promise that they will not have to pay the settlement.

“It is up to the court to decide whether the dollar amount the parties stipulated to was reasonable or an artificially high number just being used to inflate an insurance claim. Right now, the insurance company has asked that the attorney who wrote this settlement deal, wrote the factual ‘confessions’ the defendants were required to sign and set the dollar amount of the settlements, produce the evidence he had to support this deal. To date, the attorney has refused to produce this evidence and the court will decide what information must be shared with the insurance company prior to the reasonableness hearing.”

Cochran has argued in court filings that Philadelphia Indemnity’s policy limits are irrelevant, because it acted in “bad faith” in defending the claims against the defendants it was insuring. Cochran argues in court filings that when his civil lawsuits against the learning center were initially supposed to go to trial last year, “the Underlying Defendants found themselves without any defense because their insurer (Philadelphia Indemnity) had egregiously mismanaged the claims and did nothing to ensure that their handpicked counsel developed a viable defense.”

Cochran added in a phone interview Friday that because of Washington’s Insurance Fair Conduct Act, insurance companies that act in bad faith are liable for sums higher than their client’s policy limits.

“They are on the hook for the entire settlement,” Cochran said Friday.

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