School Bus Provider May Lose Insurance : L.A., Other Districts May Have to Scramble to Find New Service

An Anaheim company that provides bus service to the Los Angeles Unified School District and about 100 other school districts in the state has been threatened with the loss of its liability insurance this month, according to documents filed in an Orange County lawsuit.

If the company, Taylor Bus Service Inc., cannot resolve its insurance problems, attorneys said, school districts across the state will be forced to make other bus arrangements, a task that for some districts may be difficult in the middle of the school year.

Meanwhile, the state Department of Insurance is investigating whether liability coverage is adequate for Taylor, which last week filed suit against its primary insurance carrier, Nationwide Insurance, to prevent cancellation on Jan. 15.

Taylor provides about 500 buses under contract each day for Los Angeles Unified, or an estimated 20% of the district’s total buses, said Richard K. Mason, principal deputy county counsel for the district.

Mason said Taylor missed a Jan. 2 deadline to provide proof of adequate coverage beyond Jan. 15, and added that “time is running out” for the firm.

William Rivera, assistant to school Supt. Harry Handler, said similar situations with bus operators have arisen before and “what usually happens is that they come up with the insurance.”

Rivera said that if it begins to appear, however, that Taylor cannot provide proof of coverage in time, the district can utilize some of its own backup buses and call on other transportation contractors to provide added service.

Missed Payment

Taylor’s dispute with Nationwide centers on a missed premium payment of $27,900, according to declarations by Taylor president Tom W. Berthold filed in the Orange County Superior Court lawsuit last week.

Superior Court Commissioner Jane D. Myers ordered Nationwide not to cancel Taylor’s coverage pending a full hearing Thursday.

Taylor claimed in its suit that no other insurance is available and that cancellation would not only disrupt school bus service but would also force layoffs of hundreds of employees and destroy the company. Representatives of Taylor and Nationwide could not be reached for comment Tuesday.

Taylor recently came under the scrutiny of the Department of Insurance when several districts in the state raised questions about the Mesa Verde Insurance Trust, which Taylor lists as either its primary or excess liability insurer in many bus contracts, said D. N. Blackey, supervising investigator for the department in Southern California.

Blackey said the Mesa Verde Insurance Trust is not listed as a “viable insurance carrier” and is not licensed by the state.

Concern over the adequacy of Taylor’s coverage is not new. Two years ago, for example, the Los Angeles district raised questions about Mesa Verde, and Taylor replaced the trust with a $4-million letter of credit that provided a pool from which any liability claims could be paid during the 1985-86 school year. Nationwide provided $1 million in primary insurance, with the letter of credit used to provide $4 million in “excess” insurance required by the district.

When that letter expired last summer, Mason said Taylor again failed to provide adequate coverage. He said the district then purchased the backup insurance on its own and has been deducting the cost from contract payments to Taylor.