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 Insurance Agent Talks About Possible Reasons for CAB’s Switch

August 1, 2007 - While current and former officials are not saying publicly why the Charles A. Beard Memorial School Corporation has dropped - without school board approval - the local insurance agency it's used for about 40 years, the agent who was dropped says he was told the change resulted from two incidents that occurred this past school year.

Chad Leakey, vice president of Leakey Insurance, told The Banner that former Superintendent David McGuire and current Business Manager David Bundy were both upset over lack of insurance coverage with respect to two issues CAB faced earlier this year: the civil rights lawsuits filed by three Knightstown High School students who were expelled last fall over a film they made on their own time off school grounds; and the alleged theft of corporation funds by the business manager who preceded Bundy, Amanda Zurwell.

With respect to the expelled students' lawsuits, Leakey said CAB's coverage with Indiana Insurance - which provides liability, property and casualty insurance for the school corporation - took care of the cost of defending the litigation, but did not cover damages for violations of the students' civil rights. As a gesture of goodwill, however, and to avoid a potential claim on their errors and omissions policy, he said his agency agreed to contribute $7,000 toward the $69,000 settlement that CAB and its insurer reached with the three students and their parents in February, a move for which he said McGuire promptly thanked him.

Following the settlement, Leakey said he tried to schedule a meeting with himself, representatives of Indiana Insurance, and McGuire and Bundy, to review CAB's coverage to determine whether any changes needed to be made. However, he said his efforts to set up the meeting, first with McGuire and then with Bundy, were not successful because the CAB officials would not agree to a meeting date and time.

Before a meeting between Leakey, the Indiana Insurance representative and CAB took place, Leakey said the second coverage issue arose. After learning that Zurwell, who resigned as CAB's business manager in January after only four months on the job, may have stolen about $7,000 from the school corporation, Leakey said a claim for the missing funds was rejected by Indiana Insurance because CAB's policy did not cover instances of employee theft.

Leakey said Bundy contacted him after the Zurwell claim was denied and told him he and McGuire were disappointed and that this had been the second time this school year that needed coverage had not been in place. Leakey said that when he later called Bundy to get information needed to add employee dishonesty coverage to CAB's policy, Bundy told him he and McGuire were in the process of having a new insurance agent appointed.

"McGuire and Bundy tried to blame me for this lack of coverage," Leakey said. "These are the same two people who would not agree to sit down for a policy review meeting, despite my efforts to set one up." Had the coverage review meeting taken place, Leakey said he believes that the need for employee dishonesty coverage would have been something they would have discussed.

Leakey also said that the lack of coverage with respect to the students' lawsuits also might have been avoided if the school corporation had approved a policy renewal proposal he provided CAB last fall. Prior to the expulsion incident, he said he had presented a proposal that would have included coverage for a settlement like that reached with the students and their families. However, he said McGuire told him at that time that CAB was planning take bids on insurance for calendar year 2007 - something that ended up not happening - and to just keep the coverage the same until the first of the year. This, Leakey said, resulted in the lack of coverage for the civil rights damages.

Upset over the prospect of losing the CAB account, Leakey tried taking his concerns about how McGuire and Bundy were handling this matter to school board members. On June 12, he provided board member Wade Beatty with letters to him and other board members, McGuire and Bundy, which detailed the above incidents and let them know of his agency's interest in keeping the account. He said Beatty told him these letters were distributed immediately after the board's June 12 meeting.

During the June 12 meeting, the board voted to give McGuire and Bundy permission to get quotes or proposals from other insurance providers for coverage starting January 1. Although he had not asked the board for permission to switch agents, McGuire sent a letter to Indiana Insurance the very next day instructing them to remove Leakey Insurance as CAB's agent of record and replace them with Josh Estelle of Pfenninger Agency, a New Castle firm, effective June 20. June 13 was also the same day that McGuire notified the school board that he would be resigning at the end of the month.

Leakey said not one school board member bothered to contact him to discuss his letter and his interest in keeping the CAB account, or to notify him of McGuire's move to give the account to Pfenninger. After an Indiana Insurance representative told him of McGuire's letter in late June, Leakey said his father, Dick, president of Leakey Insurance, went to Greenfield and personally met with School Board President Mike Fruth at his place of employment to discuss this matter.

According to Dick Leakey, Fruth told him he and Chad would have an opportunity to address the board about this issue during their July 2 meeting. Chad Leakey said that when they showed up that night at CAB's central office building, he and his father were told before the meeting started by Jena Schmidt, CAB's public access officer and McGuire's administrative assistant, that they were on the agenda to speak to the board that night.

Despite to their belief that they would be given a chance to address the board during that night's meeting, the Leakeys were not allowed to do so. After the meeting, when The Banner asked why the Leakeys had not been allowed to speak, Fruth denied telling Dick Leakey they would be able to address the board during the meeting.

"There was not a place on the agenda," Fruth told The Banner. "I said (they) would be welcome to speak to somebody here after the meeting." Asked about McGuire's decision to switch the insurance account to Pfenninger, Fruth told The Banner it was something the administration was taking care of and declined further comment.

Fruth is not the only CAB official who has declined to comment on the switch of agents. As noted in last week's issue, McGuire, the person who instructed Indiana Insurance to make Pfenninger CAB's agent of record, told The Banner he didn't think it "would be to (his) advantage to comment on that at this point," and referred questions about the issue to Ray Pavy, who was appointed July 2 as CAB's interim superintendent.

Speaking to The Banner on Tuesday, Pavy was unable to shed any light on why McGuire made the switch from Leakey to Pfenninger. "I truly don't know," he said. "I'm not aware of any of the conversations or any of the things that went into that decision-making process."

Pavy, a longtime employee of the New Castle Community School Corporation who retired as their assistant superintendent at the end of 2006, told The Banner he had prior professional and personal relationships with the Pfenninger agency, its owner, Steve Pfenninger, and agent Josh Estelle. However, he said those relationships had nothing to do with the switch that was made more than two weeks before he was hired as CAB's interim superintendent.

Despite holding two meetings since McGuire had Indiana Insurance move CAB's account to Pfenninger, the school board has still not taken a vote to approve the change. The board has also not voted to approve several changes that have been made to CAB's insurance coverage since Pfenninger become CAB's agent. Stan Metlzer, a supervisor with the Indiana State Board of Accounts who oversees issues involving the state's public school corporations, told The Banner on Monday that decisions involving insurance coverage are, pursuant to state statute, to be made by school boards. This includes, he said, decisions about who will be a school corporation's designated agent of record.

"The governing body is to make these decisions," Metzler said. "Then, the superintendent and those on down are to administer them."

Asked whether the CAB School Board will be asked - after the fact - to approve the switch from Leakey Insurance to Pfenninger, as well as the policy changes that have taken effect, Pavy said he didn't know. He did, however, say that the board does still plan to accept quotes and proposals from area insurance agencies for the upcoming calendar year, although this will likely be of no help to the Leakey Insurance.

Because CAB named Pfenninger as their agent of record for the Indiana Insurance policy, Chad Leakey told The Banner that will preclude his agency from making a bid for that same coverage. The only way that would change, he said, is if CAB were to rename Leakey as its agent for Indiana Insurance. The board's next scheduled meeting is August 21.


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