Gencon Insurance Company of Vermont filed a suit Tuesday in federal court, accusing Lexington Insurance Company and Westport Insurance Corporation of refusing to honor their reinsurance obligations. Lexington operates under American International Group, while Westport falls under Swiss Re Corporate Solutions.
The dispute traces back to Miracle Meadows School, a West Virginia boarding school shuttered by state police in 2014 after investigators uncovered widespread abuse and neglect. In the years since, 177 former students have reached settlements totaling more than $86.6 million with various entities affiliated with the Seventh-day Adventist Church. Defense costs have topped $2 million.
Gencon, the captive insurer that covered those Church-affiliated organizations, paid out on the claims. Now it wants its reinsurers to make good on what it says are their contractual promises.
According to court filings, Gencon has invoiced Lexington for $36,439,052.90 and Westport for $19,002,272.74. Neither has paid.
At the heart of the disagreement is a fundamental question: which policies should have covered the underlying claims?
The reinsurers maintain the claims belonged under employment practices and sexual misconduct liability policies, not general liability coverage. They point to sexual misconduct exclusions in the excess policies as grounds for denying reimbursement.
Gencon sees it differently. The captive insurer argues that its general liability policies, starting from November 2001, narrowed the sexual misconduct exclusion to cover only "the actual or threatened sexual abuse or sexual molestation." That language, Gencon contends, preserved coverage for negligence and derivative liability claims, which formed the basis of the students' cases against Church entities.
The allocation methodology has also drawn fire. Gencon structured its reinsurance claims by opening 19 separate claims, one for each year Miracle Meadows operated, and assigned each claimant to a policy year based on when they first enrolled at the school. The approach hinges on how the policies define an occurrence: "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
Ten other reinsurers participating in Gencon's program have reportedly paid in full under this framework. Lexington and Westport have not.
The lawsuit seeks the full amounts billed, plus interest and attorneys' fees. Gencon also wants the court to declare that both reinsurers are obligated to cover defense costs and settlement payments tied to the Miracle Meadows claims.
The case, filed in the United States District Court for the District of Vermont, has been assigned docket number 2:26-cv-25. No determination on the merits has been made.
For the reinsurance market, the outcome could offer guidance on how facultative certificates respond to mass tort claims involving institutional abuse, a category of risk that shows no signs of fading from industry balance sheets.
