SUNDAY EDITION | JCPS pays out nearly $10 million in legal claims since 2009

LOUISVILLE, Ky. (WDRB) -- Following the revelation of a $200,000 payout to a high-level Jefferson County Public Schools central office employee, at least one school board member wants to learn more about the district's spending to ward off lawsuits and claims in recent years.

JCPS has paid out nearly $10 million in legal claims since 2009 that were not covered by its insurance company because the individual claims didn't meet the district's $500,000 per claim deductible, according to records obtained by WDRB News under the state's open records law.

The district's annual liability insurance premium has also increased nearly 50 percent over the last five years – from $526,502 to $777,752 – a jump that could be attributed to the dollar value of losses, the makeup of claims, the number of claims and the growth and size of the activities and programs JCPS offers, according to the district's chief financial officer, Cordelia Hardin.

"Obviously, any increase in cost is a concern that we need to be aware of," Hardin said.

The claims range from bodily injuries and property damage to "employment practice violations," according to a closed liability claim summary report provided by the district at WDRB's request.

Linda Duncan, a board member who represents southern Jefferson County, asked Superintendent Donna Hargens at least three times during public meetings last year to provide details to board members about the number of claims being levied against the district and the amounts for which those claims were settled.

"We need to know how much money is going out to cover these claims," Duncan said. "All we are ever told is that people have filed lawsuits or claims – we never find out what happened as a result of that. These claims are being paid with public money and we need to watch that."

Duncan's most recent request came during a Dec. 15 board meeting, a month after WDRB revealed a $200,000 secret settlement made between JCPS and its former public information officer, Lauren Roberts, to settle a dispute over how she left her job.

The settlement came from the district's taxpayer-funded general fund, yet the school board knew nothing about it because the board is not required to sign off on individual settlements.

JCPS initially told WDRB News that the district was reimbursed by its insurance company, but last week recanted and admitted that taxpayers ultimately paid the $200,000 settlement to Roberts.

"The total amount of the payment was under $500,000, so we were not reimbursed," said Hardin. "Our insurance company wrote out the check to Lauren Roberts, but we later had to reimburse the insurance company because it did not meet the deductible."

Ben Jackey, a spokesman for JCPS, said initially stating the district had been reimbursed by its insurance company was a mistake due to a misunderstanding of the policy.

Officials also never told board members that Roberts' firing was to be rescinded and changed to a "resignation" as part of the Aug. 19, 2013 agreement. The board didn't vote to rescind Roberts' termination until Dec. 15.

In addition to the Roberts agreement, there has been only one other case in which a settlement was reached before a lawsuit was filed. It involved Alastair Basden, a teacher at the Phoenix School of Discovery, who was employed with JCPS from 2002-2011.

According to a confidential agreement obtained by WDRB, Basden alleged he was wrongfully terminated over what JCPS said was an expired work visa at the end of the 2007-08 school year. The district reinstated Basden as a teacher and paid him $35,255 in compensation for "emotional distress and attorney fees" in 2009.

Jackey said according to the district's attorneys, the payouts to Roberts and Basden are the only two of its kind.

Duncan said the two secret settlements with Roberts and Basden are "two too many."

"We had no idea these kind of settlements were taking place until you (WDRB) reported it, yet they are coming out of our general fund," she said. "To me, settling claims is an indication of a problem between the superintendent and staff who are supposed to be following our procedures and policies."

Overall, JCPS has paid out $9.5 million in claims over the past five years:

2009: $1,715,692

2010: $1,604,903

2011: $1,741,778

2012: $1,639,499

2013: $1,386,060

2014: $1,453,021

Hardin has budgeted an additional $1.9 million to cover similar claims in 2015.

"Each year, we look at the history of what we've paid out, but also on the number of pending claims," she said. "You would rather be in a position to over budget so you can put money back into the general fund, instead of under budgeting and having to find money to cover these payouts."

The district's insurance policy is approved annually, but officials said it's been since 2006 since it has competitively bid to ensure JCPS is getting the best price.

And although the vast majority of claims are paid by the district and not by its insurance company because of the $500,000 per claim deductible, there are occasions where the policy saved the district money.

In 2010, the district settled with the parents of Max Gilpin, a 15-year-old boy who collapsed during football practice at Pleasure Ridge Park High School on Aug. 20, 2008, and died three days later.

In that case, the district paid its $500,000 deductible and the insurance company paid out $1.8 million.

"Throughout the past five years, we have recouped more from our insurer that we have paid in premiums," Hardin said. "Having been in a deficit position, we have worked with risk management programs to limit any premium adjustments."

Hardin said there are also a limited number of insurance companies that will insure a district as large as JCPS.

"You also have to understand that these companies are going to make money," she said. "Our insurance is no different than anyone else's, it is there to protect us."

Rosemary Miller, the district's general counsel, told board members in a Nov. 19 email obtained by WDRB that the district and its insurance company will adjust "about 65 claims" in a typical year, with approximately half of those being resolved with no payment.

“About 15 were paid under $10,000 and about a dozen payments (were) in the range of $10,000 to $70,000 including outside legal expenses,” Miller wrote. “There are approximately two to five settlements a year which exceed $100,000 including counsel fees.”

Miller added that the board has "not typically become involved in specific settlements" but added that if board members believe as a "matter of good governance they should be more involved in the specific settlements of particular types or sizes of claims, a process could be developed for such involvement."

Duncan says she believes a process must be developed because the district and the school board have been repeatedly criticized for the way JCPS is spending money.

Finances were the focal point mentioned in a recent year-long state audit conducted by Kentucky Auditor Adam Edelen, which resulted in 45 findings and more than 200 recommendations for improvements across six categories that included overall governance, policies, the district's internal audit process and information technology systems.

Among the findings: the JCPS board generally doesn't have the "level of understanding" to independently examine and approve the district's budget.

"We must all do a better job at being transparent," Hargens said during a December Louisville Forum luncheon with Edelen.

Hargens could not be reached for further comment last week.

Reporter Antoinette Konz can be reached at 502-585-0838 or @tkonz on Twitter.

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