EXCLUSIVE: Oberlin College insurer likely to reject coverage for Gibson Bakery $11 million verdict
and also for the potential additional $22 million in punitive damages, if those are awarded in a separate hearing.
A jury has awarded Gibson’s Bakery and its owners $11 million in compensatory damages against Oberlin College, for libel, intentional interference with business, and intentional infliction of emotional distress. The punitive damage hearing next week could add another $22 million, bringing the total to $33 million.
There will be post-trial motions to set aside the jury verdict and/or reduce the dollar amounts, and then appeals. So while the Gibson family won a major victory, it is not over.
An obvious question, and one a lot of people have been asking, is whether the college has liability insurance to cover the verdict.
Based on court filings obtained by Legal Insurrection Foundation, it appears that the insurer, Lexington Insurance Company, is likely to disclaim coverage for the intentional torts which gave rise to the verdict.
The likelihood of refusal to cover the verdict was revealed in a May 1, 2019, Motion to Intervene (pdf.)(full embed at bottom of post) filed by Lexington Insurance Company.
The purpose of the motion, according to Lexington, was “for the limited purpose of submitting interrogatories to the jury in order to determine facts at issue in this action that would impact coverage under its policy.”
Here is an excerpt from Lexington’s motion setting forth the nature of the insurance coverage (emphasis added):
Lexington issued a Commercial Umbrella Liability policy that potentially provides coverage to defendants Oberlin College aka Oberlin College and Conservatory (“Oberlin”) and Meredith Raimondo for certain damages in this action. Lexington seeks intervention in this action for the limited purpose of submitting interrogatories to the jury in order to determine facts at issue in this action that would impact coverage under its policy.
The Lexington policy does not provide coverage for “bodily injury” or “property damage” intentionally caused by defendants. While the Lexington policy potentially provides coverage in relation to “personal and advertising injury,” defined to include defamation and/or disparagement in certain circumstances, the Lexington policy excludes any such coverage if “personal and advertising injury” is caused “with the knowledge that the act would violate the rights of another … ,” or if the insured published material it knew to be false. Further, the Lexington policy provides coverage for punitive damages insurable by law, but only where the corresponding award of compensatory damages is also covered by the Lexington policy. In this action, plaintiffs Gibson Bros., Inc., Allyn Gibson, and David Gibson allege that defendants Oberlin and Ms. Raimondo published material that falsely characterized the bakery owned by plaintiffs (“Gibson’s”) as being a racist establishment. While such allegations potentially implicate “personal and advertising injury,” plaintiffs also alleged that the statements were published with malice, were intended to injure plaintiffs’ business reputation, and were part of a purported campaign to harm plaintiffs. If it is established that the defendants knew the alleged statements were false, or if the defendants knew their alleged acts would violate plaintiffs’ rights, the Lexington policy would exclude coverage for any resultant damage. Thus, Lexington seeks to intervene in order to submit jury interrogatories to determine the extent of the defendants’ knowledge in relation to the alleged publications.
Further, the Lexington policy provides coverage for punitive damages only when the punitive damages are assessed relative to covered compensatory damages. Here, plaintiffs seek punitive damages for the claims of libel, tortious interference with contract, tortious interference with business, intentional infliction of emotional distress, and trespass. Only the libel claim is potentially embraced by the Lexington policy. Thus, Lexington seeks to intervene in order to submit jury interrogatories and instructions to determine what punitive damages, if any, correspond to each cause of action.
The motion then sets forth Lexington’s inability to gain cooperation as to jury interrogatories from the college:
In particular, Lexington affirmatively requested on several occasions that the defendants submit jury interrogatories and instructions as proposed through this motion. Lexington also inquired as to when proposed jury interrogatories and instructions were due, and was informed on April 27, 2019 by defense counsel for Oberlin and Ms. Raimondo that there was currently no deadline set by the Court and that the deadline would probably be several weeks away. Lexington advised the defendants that Lexington understood the defendants would adopt Lexington’s request to submit jury interrogatories and instructions as outlined by Lexington. On April 27, 2019, the defendants responded that they would inform Lexington of their position on April 29, 2019. Defendants did not inform Lexington on April 29, 2019 as represented and, as such, Lexington is acting out of an abundance of caution in the form of this motion, as Lexington remains uncertain of defendants’ position, despite repeated communications and requests by Lexington.
The motion then sets forth the history of Lexington fighting with Oberlin College as to insurance coverage:
After tender of the lawsuit, Lexington informed the defendants that the Lexington policy did not respond to certain claims in the lawsuit. In particular, based on the claims that remain in the lawsuit, Lexington advised that the Lexington policy only potentially responds to the libel claim, . but that the Lexington policy is excess to other insurance provided through a commercial general liability policy issued by College Risk Retention Group, Inc. (“CRRG”) and an Educator’s Liability policy issued by United Educators (“UE”) in relation to the libel claim. Lexington further advised that the Lexington policy only embraces punitive damages when assessed relative to covered compensatory damages that implicate the Lexington layer of coverage. (Affidavit of Patrick Fredette (“Fredette Aff. ‘), ,r 3). In this regard, Lexington’s coverage, if any, is also excess to the UE policy not simply for any covered liability arising out of the libel claim, if any, but also any covered punitive damage award, subject to the $1 million cap in the UE policy for such damages. (Id.).
The Court rejected Lexington’s motion to intervene:
The jury instructions proposed by Lexington (at page 31 of the pdf. of the motion) differ from the jury interrogatories submitted to the jury:
Gibson Bros Inc. Jury Interrogatories
Allyn W. Gibson Jury Interrogatories
David R. Gibson Jury Interrogatories
Accordingly, based on Lexington’s court filing, it is likely that Oberlin College, should its post-trial motions and appeals fail, will have to pay out of pocket and then sue Lexington.
[Featured Image: Four generations of Gibsons after Jury Verdict][Photo Credit Legal Insurrection Foundation]
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Gibson’s Bakery v. Oberlin College – Lexington Ins Co Motion to Intervene by Legal Insurrection on Scribd
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Comments
oh ho ho. Oberlin itself is on the hook for this.
Even more reason why focusing on Oberlin’s failure so far to rebuke the alumni association letter is an important issue for the court to consider. It may also become an issue should Oberlin sue Lexington. Oberlin is an uninsurable risk. Keeping it in the news isn’t going to help them either.
I have been following this story here, but obviously didn’t place close attention. What’s the story with the alumni letter?
The letter is included in a post in the “Verdict” thread. Basically, a letter was sent to all alumni where Oberlin flatly denied any wrongdoing and disagreed with the verdict. It was about as far from contrition as one could get. I suspect it will go over as well with the alumni as the defense strategy did with the jury.
Excellent, thanks!
https://legalinsurrection.com/2019/06/the-internet-reacts-to-gibsons-bakery-v-oberlin-college-verdict/comment-page-1/#comment-946861
See the letter to alumni trashing the court decision. I posted a couple of comments making my case.
Oberlin has still failed (to my knowledge) to rebuke them. Maybe they are waiting for the usual left-wing cavalry to come over the hill? Now is the time to nip this in the bud. Make the court impose the maximum penalty and apply pressure all around making it clear to all (which now includes insurance companies, something that will hit home with colleges and universities) that this can get much worse for them and fast. It won’t happen if we do what we always do, win a key battle and then go home.
The lawyers have done their job. Now it’s time for us to pile on and make it stick. We don’t need to refight the lies later.
Well that is the bottom line isn’t it. When it comes out of the Universities operating budget and can’t be be blown off in the board meetings as a Insurance issue suddenly it becomes real. No more high price junkets and I betcha that the existing insurance premiums for everything else will skyrocket as the actuaries will be scrutinizing the school more closely.
Agree wholeheartedly, and more. This sends a long overdue message to college and university trustees everywhere that they might be wise to rein in their administrators’ explicit or de facto approval of student “activist” behavior and actions. Trustees have got away with looking away from these events and activities for far too long and need to hold accountable administrators in their charge or be held accountable themselves.
It just gets better. If I was an Oberlin student I’d transfer – my degree would not carry anything like the cachet it did last year.
Au Contraire, Mon Fraire. In the circles Oberlin graduates will travel, an Oberlin degree is going to be more valuable because both the University and the student body have virtue signaled against evil racists.
Kids don’t go to Oberlin to get an Engineering or a Physics or a Chemistry degree (although a few may). Kids go to Oberlin to get a Gender Studies or a Romance Literature or a Political Science degree.
I Think it is fair to say that Oberlin graduates will not be less employable because of this verdict and may even be slightly more employable.
Well, employable right up until the school goes out of business. It’s highly likely, IMO, that this will trigger an Evergreen-like death spiral. Not everyone at Oberlin is a psycho SJW, and many will start to think twice whether they want to attend there. The falling enrollment will then start the round of cuts, calling into question the school’s viability, which then causes more people to avoid going there and getting stranded with a partial degree.
I don’t think the school is going out of business but I think Gibsons will. Their revenue is already off and I doubt if Oberlin renews their contract with the outfit that supplies Gibsons’ baked goods for the school. Also, some locals who rely on Oberlin for their own business might not be too happy about the school having to cut corners that could affect THEIR bottom line. EVERYONE loses but at least Gibsons’ owners won’t have to worry monetarily for a while, but I think the business is doomed.
I wonder if Oberlins’ insurance covers them for having crappy legal representation. Wouldn’t that be a hoot?
Was the problem crappy lawyers or more like a really crappy defendant?
I would guess (from a distance, not knowing the locals) that locals would continue to support Gibson’s. But relations with the college would be so toxic, and risks from being in proximity to those students, that it would be prudent now to close the doors.
Something that I hope factored into the jury’s decision. Even though Gibsons won this lawsuit, they’ll probably still go out of business — proving the irreparable harm done to them.
You know what will help a small family business like Gibson’s keep going? $33 million in sweet sweet cash from Oberlin, that’s what!
Let’s see, they had about $500k in revenue last year, so that’s 66 years of revenue up front. I think they’ll be ok.
If I were the Gibson’s, I would move.
It’s a matter of prudent risk avoidance and better location for positive results in revenue.
Whether they stay in the town of Oberlin or not is up to them.
Unfortunately, Gibson’s will definitely leave Oberlin, OH. These people have tremendous courage knowing this was a high probability going into the suit. Just like Darin Wilson (who shot Michael Brown), the Gibson’s lives have been turned upside down just because they were doing their job and serving the public. At least Gibson’s will have the money to move on with their lives…if they ever get the money. Oberlin will probably appeal on grounds that the jury was….RACIST!
Gibson’s should leave town and put-up plywood on the windows. Spray paint them “Another Food Desert”. If they own the buildings…kick-out the existing renters and put plywood on all of the windows. Maybe it will feel like home for some “students.”
That’s a shame if it’s already true, and if it hasn’t been it probably will be now. I did not have the impression that Oberlin was so far gone, and I had a kid go thru senior year of high school college admissions process just this year, received the mail from Oberlin (they send an attractive artsy little booklet), etc.
Oberlin used to be a place where you could go to a liberal artsy musical campus and get a perfectly good science degree, with good grad school placement. A lot of the kids currently there came hoping for that sort of experience. It’s a shame that it’s been ideologically poisoned.
A degree in Transgender literature will be invaluable for companies like Google.
There are hundreds of private liberal arts colleges. Students select Oberlin because of its reputation for left-wing activism.
I’d have transferred long before last year!
All the insurers will be trying to get an out on this one. Unless the policies explicitly cover acts of malice, they will try and not pay. Oberlin will have to go to court and try to make the insurance companies pay out. Given the size of the potential claim against them, the insurance companies are likely to commit considerable legal resources to this. Oberlin will spend another $ million or so and a couple to several years trying to collect.
Administration doesn’t care and the Board of Trustees elects its own members so there is no oversight. Plus, it’s not their money they are spending. In all likelihood, Oberlin will dip into a couple of endowments legally under the terms of the endowments (total endowments = $770 MM). In short, this is not a painful item for Oberlin.
This will have ALL universities rethinking. More importantly, it will put a wet blanket on alumni contributions everywhere much as the chronic pedophilia settlements are crippling the Catholic Church.
Besides, a $770m endowment is not as big as you think. How many billions of dollars is Harvard’s endowment these days? Considering that they are much more engaged with funding this left-wing lunacy, you don’t think they have their calculators out? Scale up that $33m to Harvard size and think of the exposure to academia across the US. We are surely talking of billions.
Selling cancer is becoming more and more expensive. If we don’t let them escape. Again.
Harvard might be on the hook for discriminating against Asians in the admissions process.
Those would be fascinating trials, with Oberlin facing better financed insurance companies instead of a bakery it had already half managed to put out of business — discovery would be interesting!
$770 million endowment works this way: most colleges take 3.5 to 4.0% of an endowment every year as income — they count on the endowment investment income to make that up and more. Most years that is a good bet.
So right now the operating income that they take from the endowment is ~$30 million.
Recall that Oberlin just made some “painful” cuts in their operating budget to deal with a ~$9 million deficit. So despite the endowment income they’re in a bit of a hole; next year’s deficit is about $5 million.
So follow the bouncing ball: Oberlin can either fork over one whole year’s worth of operating income from the endowment, leaving them with a ~$35 – 40 million deficit in the following year, OR they can cough up ~$33 million from the endowment. That will reduce subsequent years’ endowment income by ~$1.2 million.
So they choose the latter: their planned $5 million deficit for the coming year now is $6.2 million. That’s going to hurt.
So here’s my take on the math of the actual damage, and potential bad scenario for them. Oberlin like takes around $31 million from the their endowment each year, or about 3.5%. Taking more puts the endowment at great risk of failure. With the additional costs of the compensatory and prospective costs of the punitive damages, Oberlin is looking to have to pull an equivalent of 7.25% of their endowment. This means their remaining endowment is $813.5 million. So, just to get back to their earlier balance of $879.5 million, the endowment must make an 8.1% gain WITHOUT TAKING ANYTHING OUT OF IT the following year. If they want to take out another $31 million to help with operating costs, the endowment must make up 11% to get back to par. Not assume their investments do not have a good year, and they lose a modest 5%. That leaves the endowment with just $741.83 million, an erasure of $137 million worth of value. Then, if they still need to take out $31 million the following year, that equals $4.2% of the endowment an it needs a 27.3% gain to make it back up to par. You can see, therefore, that the endowment can easily be sent into a death spiral by this verdict.
If the total cost of this to Oberlin is 33 million (assuming they don’t get max. punitive, but adding attorney fees and other costs) and they’re running at a 3% cost of capital (as you implied by the expectation that much is replaced in the endowment every year) that comes to a reduction of $1 million operating income per year — in perpetuity assuming a steady state.
This is compounded by the following problems:
(1) they’re already running a deficit with no clear plan to get out of it — this is typical of small liberal arts colleges these days, which are under a lot of stress. Hampshire College, which has the huge prestige advantage of being a part of the 5 college consortium including Amherst, Smith, Mount Holyoke and UMass Amherst — look like it will close.
(2) the market for students will be getting worse as numbers decline
(3) Oberlin’s reputation will take a large hit from this. Kids will start preferring Kenyon and Denison unless they’re really into music.
Look at what Olberin has done to itself. All it had to do was not be such arrogant,obnoxious,entitled, smug arseholes.
That’s it.
Would that have been so hard?
Based upon their mass email following the verdict the answer, apparently, is “yes”. They just can’t help themselves.
(Apologies for the vulgarity above but I needed it for artistic license)
Expecting Libs not be arrogant, obnoxious, entitled and smug, is asking the to not be Libs
right up until the trial Oberlin could have stopped this by just saying “sorry- this got out of hand”…paid a 100k or so to make it right, and did some PR to help Gibsons get right.
For good or bad, I don’t think this case changes the reputation of Oberlin graduates. It might make the issues at Oberlin more salient for the parents of students who wish to apply to Oberlin though. I also think this might be salient for the many schools in the region who seek to emulate Oberlin but have much smaller endowments. If I am Denison or Wabash, I think two before I adopt the “Screw the Townies” risk management model.
Why don’t you think that this case, and revelations that these students could be “unleashed” and call an innocent business racist, and understanding about how they’ve been indoctrinated for their time at Oberlin (the vaunted “Oberlin education”) — why on earth do you think it would not affect the reputation of the graduates?
I would be much less inclined to hire someone with an Oberlin degree. But since I worked in the aerospace world, where we hired people who could actually produce, I never would have had the opportunity. We hired from real institutions — Rensselaer, Purdue, Georgia Tech, UC-Irvine, Penn State, …
The thought of a bunch of students who could be “unleashed” (I know I am repeating myself …) I would be afraid to have that in my company.
And I can avoid it, without any sort of civil rights or discrimination issues, simply by not recruiting there. Seems like an easy business decision.
The conservatory grads may not do much worse because they’re destined for the “gig economy” anyway and they have an easily testable skill in music. But for people from the college who want “jobs” — I can’t see it making business sense to recruit there.
Or, maybe I’m exactly wrong, and FB, Google etc. will start treating those grads like people from Stanford.
“The punitive damage hearing next week could add another $22 million, bringing the total to $33 million”
***
How does the punitive damages hearing work? Do the attys. give statements rehashing the facts introduced at trial or can the plaintiff attys. introduce new evidence showing lack of remorse, malice, etc. such as the “alumni letter”?
Oberlin can never back down. Each dollar they have to cough up is proof they are “down for the struggle”. As with all Prog issues, this polarization is required. The Left NEVER apologises and NEVER gives up. They are NEVER wrong. There are billions of bucks out there waiting to be directed to this cause. When is Soros invited to the campus?
I dunno, I just think they are in some sort of mood and think that it will all be made OK for them because SJW or something. They didn’t work with their insurance company either to get an allocated verdict so that it would be clear what the insurance owed and what it didn’t.
Oberlin just didn’t do jack sh*t. They stood their ground and waited for the SJW gods to save them.
It looks like the United Educators insurance policy will cover Oberlin for $25 million for libel, according to the last of the motions given in the text window, paragraph 20. That would surely be enough for the actual plus max punitive.
Unless of course the UE policy also excludes intentional torts or there’s some other reason they don’t pay. But Lexington does not discuss any such difficulty in their motion.
“Unless of course the UE policy also excludes intentional torts or there’s some other reason they don’t pay. But Lexington does not discuss any such difficulty in their motion.”
It is highly likely the insurer is not obligated to pay out on a claim that is the result of malicious acts, which by definition are intentional acts to harm another. Read the Lexington motion again. I think they make that exact point.
the language on these forms is the same for all insurers- the insurers license the language from a common source.
So then, what’s the effect of that language in a case like this? Is the ins. company on the hook?
It is my understanding that under Ohio law, acts of malice are not insurable. The jury decided Oberlin’s acts were malicious, therefore punitive awards are warranted, and the insurance company does not have to pay out on its policy which will only cover errors and omissions, not intentional acts to inflict harm on others.
As I understand the intent of punitive damages is to prevent the Defendant from engaging such behavior in the future. The Liebeck v McDonald’s suit over hot coffee did not make McDonald’s lover the temperature of their coffee (I still need to request ice in the coffee so I can drink it). Thus, the question of will Oberlin change its attitude or punish students and/or educators for their anti-capitalist mindset?
In reality, one supposes Gibson’s will need to relocate to avoid any further such behavior by Oberlin et al.
lower not lover the temperature of the McDonald’s coffee.
Actually it did. FOr a couple of years, but what happened is that they discovered that no one wanted to buy tepid coffee. SO they went back to their old ways and just printed warnings on their cups.
I do not know the eventual outcome of this trial through all of the years of appeals and legal maneuvering, but one thing this trial did do is to put all colleges in the US on notice that supporting SJW’s against the community they are located in can be hazardous to their fiscal health. Maybe money is the root of all change.
Will Oberling college have to put up a bond?
My understanding from other lawsuits is that at some point in the process they will have to put a bond to cover the judgement.
The verdict is going to be appealed of course. What I would like the judge to do is order Oberlin to put all the money for the damages in escrow so they can’t not pay when the time comes..
Easy solution: The Obamas could cover the entire nut with the proceeds from their Netflix deal which is supposed to be bumping $50 million. After all, Michelle said:
…when she gave the 2015 Oberlin graduation speech. The O’s need to put their money where their mouth is.
I suspect similar insurance policies for other colleges will have the new contracts tightened up considerably regarding such matters.
I believe the term your are looking for is a “hazard” and bet your bottom they’ll cramp down on this all across the spectrum. So even if insurance does end up paying this time- the contract language will be updated so that it’ll be the last time they pay for SJW tantrums.
Color me unsurprised. And highly amused.
Instalanche!
Oberlin will now prepare for dealing with Lexington, the insurance company. I’m sure they already have a solid strategy, in fact, sources say that the plan is this: come out now and say that Lexington is supporting racism by threatening to not pay out. Lexington must be a company full of racist alt-right haters, and this is how they provide a platform for the racist bakery.
Note that the above is satire, I have no sources and no idea what Oberlin’s plans are. I also have no opinion or knowledge about Lexington or any employees or executives there and if they may be racist in any way or haters, or provide platforms for racists. Any statements above do not represent my opinion or anyone else I know. I am always careful to not taunt the happy fun ball.
Also should mention that I don’t believe the bakery or any owners or employees are racist.
Don’t know how they’d fare vs. Lexington on the coverage issue, Oberlin’s lawyers don’t appear to be very good.
Here’s local coverage from the town of Oberlin newspaper: http://www.chroniclet.com/Local-News/2019/06/07/Gibson-s-Bakery-v-Oberlin-College-More-than-11-million-awarded.html
Their endowment is $879.5 million. This will be a ding but liquidating unrestricted portions of the endowment will let the college get past this financially. Somebody needs to be making noise with Oberlin’s accreditor regardless of how high damages go in hopes of removing their Title IV eligibility. Cutting off federal student aid would hasten their collapse as they’re not ready to pivot to become a liberal Hillsdale or Grove City.
I agree their accreditation should be reviewed. This behavior by administration and students is beyond the pale.
This story just gets better and better! I hope Oberlin loses students and alumni donations and enters a death spiral now. It would be a good example for all the other SJW institutions.
I practice in the field of insurance coverage. I predict Oberlin’s insurers wind up paying most or all of the damages awarded.
That is sad. But I can take solace in the increased premiums as well as punishment by donors, I hope.
Let the College setup a payment plan..l. say $1 million a year for the next 33 years! Or better yet let selected Alumni and staff pay it off via a Debters Prison!
Parent PLUS loans are currently running around 7% interest, and they start compounding the day you borrow the money. I would apply the same interest rate to any payment plan set up for Oberlin.
I think the insurers will have an easy time proving it was intentional. NOT once did they attempt to make it right with the Gibsons. All they had to do was attempt to make it right— I mean even a half hearted attempt would have kept them out of court. So when they try to sue the insurers, it’s go even more badly because their arrogance will be on parade.
Just look at some of the counts – Tortious Interference with a Contract is about as intentional as you can get. Hard thing to do accidentally.
“I think the insurers will have an easy time proving it was intentional.”
They do not have to prove Oberlin’s actions were intentional. That has already been determined by the trial jury that found Oberlin’s acts to be malicious (an act of malice is by definition intentional) and stands, unless overturned in appeal, as a legally established matter of fact.
In accordance with Ohio law, it appears punitive damages assessed based on due to malicious conduct is not insurable (See O.R.C. $ 3937.182(B)). I would bet the same applies to compensatory damages.
Sweet, sweet justice
That was a terrible insurance policy. Oberlin went cheap, which is surprising considering their tuition costs.