Kern High School District insurers announced Wednesday they are dropping efforts to appeal a nearly $1.5 million verdict in a civil suit involving an autistic girl harmed in a school bathroom in 2009.
KHSD's insurance company -- Self-Insured Schools of California (SISC) -- said it removed defense attorney Leonard Herr from all KHSD litigation and apologized for tactics it used in defending KHSD.
SISC also apologized for not informing the district of an early $225,000 settlement offer it declined, according to a SISC news release Wednesday.
"As SISC does after every case, we will conduct a review of their practices and procedures regarding the litigation process of this particular case," Nick Kouklis, SISC's chief executive officer, wrote in the release.
Members of the high school district board had implored SISC not to appeal, saying KHSD needed to take responsibility for what happened to the girl. Still, SISC filed a legal notice Aug. 7 seeking the right to appeal.
KHSD board President Chad Vegas promised during a Kern County Board of Education meeting Tuesday to try to remove SISC as the district's liability insurer if the company failed to "clean up its act."
"I think SISC is taking the right steps to rectify what they clearly did wrong," he said after Wednesday evening's announcement. "In other words, I appreciate the fact that they are cleaning up their mess."
The high-profile lawsuit stemmed from an incident in which a teacher's aide found an autistic boy and girl naked from the waist down in an Independence High bathroom in 2009.
The boy was "pressed against" the girl from behind. Administrators did not immediately notify the girl's parents nor the Bakersfield Police Department. As a result, the girl's parents successfully sued KHSD in civil court seeking money to cover the costs of therapy.
SISC attorney Herr argued in court on behalf of KHSD that the low mental capacity of the girl prevented her from suffering mental harm from the incident. To prove the point, SISC investigators followed her into a Bakersfield Wal-Mart in 2013 and a teacher photographed her in class without her parents' consent.
The tactics proved unsuccessful with the Kern County Superior Court jury who heard the case and awarded the parents $1.5 million in May; SISC also failed to convince the trial judge to toss the verdict.
The insurance company decision to halt another attempt at a new verdict came one day after KHSD board members spoke out against any appeal to the Kern County Board of Education. SISC is an arm of the Kern County Superintendent of Schools office, which is overseen by the Board of Education.
Kern County Superintendent of Schools Christine Frazier said she helped facilitate a phone conversation that led to SISC dropping the appeal Wednesday. She spoke to Kouklis; KHSD Superintendent Bryon Schaefer; and Scott Cole, KHSD's assistant superintendent of business.
"It was just verifying that the district really wanted not to appeal this," Frazier said.
Letting the case go is no simple matter, though.
That's because the litigation costs and amount awarded has exceeded KHSD's maximum level of liability coverage, Kouklis said Wednesday.
The costs won't force SISC to appeal the verdict. But they may require it to tap into funds SISC pools from KHSD and 147 other districts for membership.
Kouklis said SISC only covers its member districts such as KHSD up to $1.5 million. SISC has spent $588,654 in two separate trials defending KHSD against the parents of the former student, said Robert Kretzmer, SISC director of property and liability.
KHSD pays SISC an annual premium that was $1.67 million in the 2013-2014 fiscal year.
SISC purchases extra insurance, up to $10 million, from Everest National Insurance Company for situations like this, Kouklis said. SISC will have to tap that extra insurance through Everest.
That also means Everest's attorneys have input into the case.
"We have sought their opinion, and they have said they felt there were grounds to appeal," Kouklis said.
Everest can't force an appeal. But if it feels an appeal would have resulted in a lower cost, it could reduce the amount Everest will pay.
That would mean SISC has to make up the remainder from pooled money.
"We're preparing now for that possibility," Kouklis said.