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posted: 5/11/2013 8:00 AM

Mold: District tried to settle with insurance agency

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It's been more than a decade since educators had to deal with mold at St. Charles East High School and the lawsuits filed by families as a result of exposure to students.

But the legal battle is not completely over. In fact, in July, the reset button will be pushed on a lingering lawsuit that may still see district taxpayers on the hook for millions of dollars.

St. Charles Unit District 303 was covered by multiple insurers at the time of the 2001 mold outbreak. But in a series of settlements with several of the insurers, the district's pooled-insurance company, the Illinois School District Agency, wound up as the last company still in the mix and the brunt of remaining litigation costs.

The result was a lawsuit first filed in 2003 in which the ISDA claimed District 303 "received a double recovery of defense and indemnity costs" and a "windfall profit and has been unjustly enriched."

In other words, ISDA believed it was unjustly billed for several expenses and that the district ultimately ended up with more than it needed to pay for all its mold litigation costs because the other insurance companies had also chipped in.

The school district has stated in court that it received no such windfall. In fact, the school district said it recovered less than one-third of its costs.

At the crux of the ongoing dispute are $2.2 million in "expert and consultant bills" related to the use of a mold consultant who helped the district with the actual mold remediation and then was further employed by the district as a consultant in the litigation with families who sued the district.

"That is a very complicated issue," said Brad Cauffman, the school district's chief financial officer. "The consultant was the mold expert here to help us determine the best way to do the remediation at the school. But he was also seen as the best expert to help us defend the lawsuits. It just became very blurry with where his time started and stopped with the mold remediation and where it started and stopped with the litigation."

As a result, ISDA claims only some or none of the consultant's $2.2 million bill should be covered by the insurance claim. Cauffman said the school district has tried to settle the dispute twice with ISDA but could not come to terms.

"We know they won't take anything less than $1 million," Cauffman said. "And I'm pretty sure if we called them up and said we'd write a check for $2 million, that's the only way they would agree to stop fighting us."

A seesaw of litigation history in the case, with the school district winning in the lower courts and ISDA prevailing on appeal, will now see the case return back to the lower courts starting this July, and the legal costs will continue to mount.

"To be clear, the litigation related to the students and parents who had concerns about the mold issues they felt they incurred while at the building is long settled," Cauffman said. "That's all paid and gone. It's this other disagreement with one of our insurance companies that had just gotten to be a long, long ordeal. We would just like the suit to be over."

Representatives for ISDA declined to comment.

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