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Insurance Company Files Libel Suit Against N.Y. School Boards' Group

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By Tom Mirga

An Albany, N.Y.-based insurance company has filed a $42-million libel suit against the New York State School Boards Association and its executive director over their allegations that certain insurance firms attempted to undercut a self-insurance pool for school districts that the school-board group had tried to create.

In a complaint dated March 5 and filed with a state trial court in Albany, the United Community Insurance Company seeks a total of $7 million in actual damages and $35 million in punitive damages against the nyssba and its director, Louis Grumet.

The complaint centers on statements by Mr. Grumet on behalf of the nyssba that were published in the April 3 and Sept. 27, 1989, editions of the association's newsletter, and in the Sept. 18, 1989, edition of The National Underwriter, a trade publication.

The insurance company contends in its complaint that those statements were intended to give readers the impression that the firm "had been guilty of illegal, collusive, and anti-competitive practices in its issuance of property- and casualty-insurance policies to school districts" in New York State from 1985 through 1987, a period when the association's not-for-profit insurance pool was competing with United Community and other commercial insurance firms.

"Our allegation is that the defendants in three separate publications uttered a series of defamatory remarks concerning ucic," Michael J. Smith, a lawyer for the insurance company, said last week.

"The defendants allege that the plaintiff engaged in collusive action to fix rates in order to harm an insurance product being offered by the school-board association," Mr. Smith continued. "They also have claimed that ucic 'copped a plea' concerning that activity, neither of which is true. The clear implication of the statements is that [ucic] engaged in conspiratorial or perhaps criminal conduct, which is untrue."

Jay Worona, the school-board group's deputy counsel and director of litigation services, said last week that the association "does not believe there is any basis to the lawsuit."

"We will vigorously defend our interests," he added, declining further comment.

August Steinhilber, general counsel of the National School Boards Association, said last week that his group plans "to defend and help" its New York affiliate "in any way possible." He also declined further comment.

The nsba was not named as a defendant in the suit.

Lawsuit's Roots

The ucic's complaint grew out of attempts by the nyssba beginning in the mid-1980's to create a self-insurance pool for the state's school districts.

A 1986 state law allows groups of 25 or more public entities to form such pools. The state declined to license the association's pool because it failed to meet the 25-member minimum.

The school-board association filed a complaint with the state insurance department that alleged in part that it was unable to meet the requirement because certain insurance firms had lowered their premium quotations to school districts in an attempt to undercut the association's self-insurance pool.

In January 1989, the department announced that its investigation found no evidence of collusive or other illegal behavior on the part of the firms cited in the complaint.

The school-boards association subsequently filed suit in state court in May 1989 against the insurance department, charging that the agency had failed to investigate fully its allegations against the insurance firms. A state trial judge dismissed that suit in September 1989.

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