A New Jersey private school has filed a bad faith lawsuit against Utica Mutual Insurance Co., alleging the insurer wrongfully refused to settle a sex abuse lawsuit brought by a former student within policy limits.
The Order of St. Benedict of New Jersey (OSBNJ), which operates Delbarton School, claimed Utica’s refusal exposed the school to the risk of an excess verdict, including punitive damages, despite multiple opportunities to resolve the case within its $1 million primary and $1 million umbrella liability policies. The school is seeking indemnity, including reimbursement of legal fees it says were incurred due to the insurer’s stance, according to the complaint.
The underlying lawsuit stemmed from allegations made by a former student, identified as “T.M.,” who claims he was sexually abused at Delbarton in 1976, BestWire reported. T.M. first filed a suit in 2017, later amending the complaint in 2020. The case sought compensatory and punitive damages on grounds including negligence, intentional misconduct, breach of fiduciary duty, and fraudulent concealment.
According to the school’s filing, Utica initially agreed to defend OSBNJ under the primary policy and acknowledged a limited duty to indemnify. However, in 2018, the insurer rejected a settlement offer, prompting years of additional litigation costs. Discovery in the case, the school said, revealed “significant exposure” to liability, including the likelihood of a large damages award if the case went to trial.
Settlement offers and dispute
On Aug. 11, the school filed an offer of judgment of $625,000, with Utica contributing more than $10,000 toward the amount. The complaint characterizes this as an acknowledgment by Utica that the plaintiff would likely prevail at trial. Days before jury selection, the plaintiff made another settlement offer, which the school demanded Utica accept. The insurer, however, did not agree.
The school argued the proposed settlement was well within policy limits and would have eliminated compensatory damages claims while dismissing punitive damages exposure.
By refusing, OSBNJ contended that Utica placed the school at risk of a verdict substantially exceeding policy limits, including damages for pain and suffering, emotional trauma, medical expenses, lost wages, and legal fees.
Wider context
The lawsuit highlighted growing disputes between policyholders and insurers over coverage of sexual abuse claims. Earlier this year, an Illinois appellate court upheld a pause on National Surety Corp.’s case seeking to avoid covering abuse claims against the Boy Scouts of America, citing the youth group’s ongoing federal bankruptcy proceedings.
Utica Mutual, whose underwriting entities hold a Best’s Financial Strength Rating of A (Excellent), has not yet publicly commented on the Delbarton complaint. An attorney for OSBNJ declined to comment, citing the ongoing litigation, according to the report.
