by Matt Hughes
J-E News Editor
A law suit between the city of Providence and the Ohio Casualty Insurance Company stands to be an important case, and not just for the city.
Providence is seeking to get insurance payments from the Ohio Casualty Insurance Company (OCC), the company that insured the city against losses caused by former City Clerk Sara Stevens. OCC is claiming that, despite the fact that the city paid their bill every year, the policy only pays for a single year’s losses. Stevens was convicted of embezzlement over the years of 2001, 2002 and 2003.
In October of 1997 OCC issued the surety bond to the City of Providence, in which it agreed to indemnify Providence up to the sum of $300,000 for losses caused by various acts and omissions attributable to then city clerk Sara Stevens.
“Providence subsequently terminated Stevens’ employment in May, 2004, upon discovering that Stevens had embezzled city funds in excess of $300,000 over a period of several years,” Appeals Judge Joy A. Moore wrote in a 2012 decision.
“It took a couple of years to get the first $300,000,” said Providence Mayor Eddie Gooch. He added that at that point OCC felt that it’s obligation to the city was complete. City officials disagreed.
“The city felt that the bond insurance company owed us two more years,” Gooch explained. “They tried to say that it was a one year thing.”
In a May of 2012 decision, the court sent the case back to Webster County Circuit Court over what seems like a technicality.
According to that ruling, Judge Joy Moore and the other two judges on the panel did not like the wording of the lower court’s decision. So the decision was rewritten and sent back to the appeals court.
“I think the court of appeals could have said that it was the obligation of the appealing party to be sure everything was in order, and decided in the city’s favor,” said Providence City Attorney Richard Peyton. “But instead they sent it back to the lower court.”
Judge Williams changed the wording the court had not liked, and the case went back to the Kentucky Court of Appeals. The second time, with a different set of appeals judges, the outcome was totally different.
“We disagree with the trial court’s conclusion that the city thought it was buying $300,000.00 of coverage for each successive year of Stevens’ service as clerk,” Judge Christopher Nickell wrote in the appeals court’s decision. “That may well have been the city’s wish and desire after the losses were revealed, but there was no credible evidence they bargained for such language on the relevant date—October 1, 1997.”
Peyton said that the city had filed for a rehearing due to a mistake they allege Judge Nickell made in his decision.
“Things go according to their own schedule,” Peyton said. “If the Court of Appeals has a large work load, you have to wait a long time. If they have a light load you might get a quick decision.”
Regardless of how the petition for a rehearing goes, it could still be some time before Providence would potentially see any money. Regardless of whether the city gets a rehearing or not, ultimately whoever loses the appeals case will most likely seek to move the case to the Kentucky Supreme Court.
“This is a case that the supreme court would have to decide if it was important enough to take into consideration,” Peyton explained. This process will be handled though a discretionary review.
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