Insurance Layers and Reinsurance Agreements
Since 1987, Gencon has insured church-affiliated organizations under primary and excess general liability policies. Beginning in 1995, it transferred second-layer excess risks to reinsurers.
Westport provided coverage from 1999 to 2005, while Lexington did so from 2005 to 2011, the complaint states.
The financial clash now unfolding centers on whether those reinsurers must reimburse Gencon for settlements tied to allegations of abuse at Miracle Meadows School in West Virginia.
The Miracle Meadows Allegations
Miracle Meadows, founded in 1988 by Gayle Clark, was owned by a church member but was not owned or sanctioned by the church itself, the complaint says.
In 2014, West Virginia state police raided and shut down the school following investigations by the state Department of Health and Human Resources and a student’s attempted suicide. Clark and other staff members were arrested.
Three years later, 27 former students filed individual lawsuits alleging that from 1999 to 2014 they endured deplorable living conditions, physical and mental abuse, false imprisonment, and educational, medical and nutritional neglect. Many also alleged sexual misconduct.
Gencon said its claims administrator, Adventist Risk Management Inc. (ARM), determined the physical abuse allegations triggered a duty to defend under the general liability policies and that no exclusions barred coverage.
In 2020, ARM settled those initial 27 cases for $19 million.
Additional claims followed. According to Gencon, settlements for later cases ranged from $450,000 to $650,000. To date, ARM has resolved claims brought by 177 former students, paying nearly $86.7 million in settlements and incurring more than $2 million in defense costs.
