Monday, September 24, 2012

Breaking Sad: Is USA Swimming on the hook for more than $2.5 Million in Brooke Taflinger Case? - I don't think so!

[Paragraph  updated] Local Swim Clubs are forced to use USA Swimming Insurance or they won't get their meets certified.

Here is where it gets really murky.

There are two insurance companies connected to USA Swimming. The first level is the United States Sporting Insurance Company (USSIC) - which USA Swimming owns but I am totally unclear on what they provide or cover.

Lexington is their second level insurer which covers General Liability but they do not cover sex abuse claims. The USA Swimming site explains their insurance option here:  [Link]

Lexington makes it clear that they will not cover sexual abuse claims.

A letter sent to me originating from Indiana:

"... A Federal Court ruling (Case 1:09-cv-00771-TWP-DML, US District Court, South District of Indiana, Indianapolis Division) in Indiana has placed USA Swimming in the position of having to pay more than $2.5 million in the Brooke Taflinger case or risk having to pay much more in accrued interest and sanctions.

Federal Judge Tanya Walton Pratt signed a default judgment for Indianapolis attorney Jonathan Little and his client Brooke Taflinger against Central Indiana Aquatics and its former Coach Brian Hindson for the amount of $2,537,000.

"Basically USA Swimming and its insurance carrier walked away from their obligation as swim club insurers and provided no legal defense for the club," said Jonathan Little. "The same strategy backfired for USA Swimming in Kansas City last year (Case 0516-CV-23636, Jackson County Circuit Court, Kansas City, Missouri) when they walked away from former Coach Pete Malone's club in the molestation case of Craig Ivancic. That decision cost USA Swimming more than $12.5 million in December of last year," added Little.

According to the 2011 Kansas City court ruling, the Judge found that USA Swimming refused to pay a 2005 judgment against the Johnson County Park and Recreation District (JCPRD) Blazers and Malone without just cause or excuse. Lexington, USA Swimming's insurance carrier, according to the decision argued that swim clubs are not insured for any acts arising out of or as a result of Sexual Misconduct. A two day trial in 2007 resulted in the court entering a judgment against JCPRD and Malone for $5,040,000 plus interest and costs.

As a result of not paying the judgment, garnishment proceedings in December of 2011 resulted in the original $5,040,000 award climbing to more than $12.5 million with the additional awarding of interest, expenses and legal fees.

Part of the reason, according to the decision, was that USA Swimming's insurance carrier, Lexington, repeatedly misstated the terms of its policies to the Court including the sexual misconduct exclusion. Lexington, the decision states, also lied to the Court in claiming that its hours defending the case were less than what the plaintiff's law firm expended in bringing the case.

"The Kansas City case shows that USA Swimming will throw member clubs under the bus in an effort to dodge liability for molestation claims," said Little. "It also shows that they have no concern for molestation victims and will do anything legally to avoid taking care of these victims," added Little.

In the case against Central Indiana Swimming, the Board of Directors Meeting minutes of April 21, 2008 report that legal counsel Buddy Pylitt, retained by USA Swimming, advised Central Indiana on their legal liabilities with the club members then voting to form a new club, VIPER Swim Club. "The formation of the VIPER Swim Club was another attempt by Indiana Swimming and USA Swimming to abdicate its responsibilities to those harmed by USA Swimming coaches," said Little.

Brooke Taflinger learned in 2008 that her former swimming coach Brian Hindson had secretly videotaped her as she changed clothes in a locker room. Hindson eventually pleaded guilty to 16 counts relating to the production, distribution, and possession of child pornography—none relating to the footage of Taflinger. Hindson is now serving 400 months in federal prison. ..."

[Update: I did further research and found that Lexington, USA Swimming's insurance company, will not cover lawsuits regarding child sex abuse injuries. Thus, it appears to me that a Local Swimming Club (LSC) has to have secondary or third level insurance to protect them from sex abuse claims.

How this ties into Brooke Taflinger is murky but there was a recent lawsuit in Missouri mentioned above whereas the court ruled that Lexington was indeed liable to pay up on a sex abuse claim even though the policy stated otherwise. That in itself may or may not set a precedent that would possibly have Lexington pay the Brooke Taflinger her damage claim. I must state in no uncertain terms that "it may" or "may not" and the courts will determine what happens.

Brooke Taflinger had additionally sued USA Swimming as well as Hindson and Central Indiana Aquatics but her claims against USA Swimming were dismissed last April.

From Swimming World: 
"THE United States District Court ruled today to grant summary judgment for defendants USA Swimming and the Westfield Washington School Corporation, effectively ending plantiff Brooke Taflinger's suit against the two companies following allegations of sexual abuse when Taflinger was an 18-year-old swimmer. [...] 
USA Swimming was also sued on claims of "breach of a duty of care based on a special relationship, and for breach of a contractual duty to provide a safe environment," and Westfield Washington had an additional claim for "negligence and breach of a duty of care...." 

Here is an enormously huge question: If USA Swimming uses Lexington which I  believe is owned by AIG. What does the United States Sporting Insurance Company (USSIC) cover or do for the swimmers? It's being reported that USSIC contracts out to Lexington. I have a second source that told me the same thing.


Sarah G said...

I thought the insurance company was called United States Sports Insurance Company. What is Lexington?

Two things are very significant here and I'd like you to post them or email them to me if you have written proof.

1) your original claim that clubs/LSCs are forced to buy the USA Insurance; i dare you to prove it.

2) the minutes of the Central Indiana meeting advising a club can be dissolved and reformed. Do you have those minutes.

If you have proof, I have an strong opinion about both, and I'm not afraid to post with my name.

Anonymous said...

Where have we heard this before?

This is not a mistake. This appears to be the overriding legal tactic of an organization out of control.

Anonymous said...

If USSIC contracts to Lexington, isn't is just a shell company? This arrangement seems to be a means to hide financial transactions from someone. Who are they hiding from? Membership, board members, IRS?

Tony Austin said...

Yes, it is a shell corporation which is a legal and even though they contract out it still makes a profit off the swimmers it protects.

This is all fine and look in my opinion if the money is going back to the swimmers in some way. However, what if it is going to unnamed "consultants" and/or "contracts" unrelated the the USA-S swimmers?

Anonymous said...

Just because the concept is legal, doesn't mean this particular instance is legal. It doesn't make sense. There are expenses to having an off-shore company. USAS could place their insurance needs with Lexington w/o leaving Colorado Springs and w/o a second management structure.

There are some advantages to having the off-shore company, and most are illegal. Hiding money and tax avoidance top the list. Both could be true with USSIC/Lexington and USAS.

I assume by your use of quotes around the word consultants, that you mean additional salary to USAS management, and those who need to keep their mouth shout.

If swimmers are benefiting, USAS should explain how.

Tony Austin said...

I fully agree.

And you got the meaning of my quotations correct as well. I suspect that that too would not be illegal as well I believe.

Ironic that a non profit designed to create an Olympic team for the United States has a foreign born corporation that they own with no transparency.

Anonymous said...

Using a foreign corporation is more than ironic. It's unpatriotic and suspicious.

Does anyone know the rationale behind it?

USAS pays premiums and makes $1.7M annual capital contributions to USSIC. (from the minutes of the Sep 11, 2011 USAS board meeting). If it used Lexington directly, it would only pay premiums. I wonder how many board members voted to approve this, but have little idea why it even exists.

Weilgus raised a fuss when a company presented another insurance alternative to the LSCs. He claimed the cost was much higher, but if part of the membership fees go toward a capital fund, this needs to be added to the premium. The travel expenses for USAS staff to attend USSIC board meeting in Barbados may be funded by USAS; if so, should be added to the cost.