Gimme a W-A-I-V-E-R . . . What’s that Spell?!

by

Jestes v. Cleveland County Board of Education (North Carolina)
(High School Cheerleader Injured During Practice and Sued School Board; School Board was Partially Immune Pursuant to Government Immunity Statutes, But Waived Immunity in Part By Procuring Excess Liability Insurance)

A cheerleader, who was injured while participating in a cheerleading practice, brought a lawsuit against the school board and its cheerleading coach. The school board filed a motion for summary judgment, citing government immunity barring actions against the state, its counties, and its public officials sued in their official capacity. The trial court denied the motion in part and granted it in part, finding that the board was immune up to a certain dollar value, but that the board had waived its immunity above that value by procuring excess liability insurance coverage. The board appealed the ruling.

North Carolina General Statute § 115C-42 provides that a board of education may waive its governmental immunity by securing liability insurance. The Board was a member of the North Carolina School Boards Trust (“NCSBT”) Risk Management Program. It entered into a Coverage Agreement with the NCSBT which allowed for the payment of certain claims made against the board and its employees for erroneous acts or omissions. However, the Coverage Agreement included a specific exclusion for claims arising from cheerleading activities. NCSBT also purchased an “Excess Policy” from Folksamerica Reinsurance Company. The “Excess Policy” applied to “bodily injury and/or property damage liability other than automobile” claims above the $150,000 NCSBT fund limits (up to $850,000) and contained an overall coverage limit of $1,000,000.

On appeal, the court affirmed the lower court ruling, finding that the school board had not waived its immunity up to $150,000 because the “Coverage Agreement” did not amount to the board “procuring insurance through a company or corporation licensed and authorized to issue insurance in this State or a qualified insurer as determined by the Department of Insurance,” as required by § 115C-42. However, the “Excess Policy” did meet those criteria. The issue was then whether or not the cheerleading exclusion found in the “Coverage Agreement” extended to the “Excess Policy”. The court ultimately ruled that the exclusions of the “Coverage Agreement” were not clearly and expressly incorporated in the “Excess Policy” via the policy language.

Therefore, the court interpreted the policy in favor of coverage. As a result, the court ruled that the school board had waived its immunity for claims in excess of $150,000 (and up to $1,000,000). The ruling on the school board’s motion for summary judgment, granting it in part and denying it in part, was affirmed and the case was remanded for trial.

NOTE: This case highlights the importance of thorough risk management practices. Close attention should be paid to compare and analyze the language and scope of all possible insurance and coverage, as well as the impact of any pertinent indemnity/hold harmless agreements. Entities should also be intimately familiar with any and all potential immunities and factors that could vitiate those protections.

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