School Bus Firm Facing Liquidation Over Insurance Problem

Taylor Bus Service, one of the largest school bus operators in California, faces liquidation unless it resolves its conflicts with a number of major school districts, the president of the Anaheim firm said Monday.

Taylor, which missed a $4-million loan payment to First Interstate Bank in late March, filed for financial reorganization and protection from creditors earlier this month under Chapter 11 of the federal bankruptcy code.

Thomas Berthold, Taylor’s owner and president, said Monday that the filing won’t affect the 40-year-old private company’s ability to service its current contracts--including bus service for six school districts in Orange County.

But Taylor has been devastated by the loss of contracts with several large districts--including the Los Angeles, San Jose and San Diego unified school districts--in the past 18 months, Berthold said.

‘We have gone from being a $30-million-a-year company to a $10-million-a-year company,” he said, and still must make payments on buses acquired when the company had 66% more business than it now does.

Taylor is now operating about 500 buses, Berthold said, but has about 900 more that are inactive because of the contract cancellations. Additionally, Berthold said, the company has laid off more than 700 employees in the past 18 months.

Berthold said his company “is going to have to liquidate” unless the impasse over insurance is resolved “because we’re in the school bus business, and without a resolution there is no way” to continue.

The contracts were canceled in a dispute over the adequacy of Taylor’s liability insurance, prompting Taylor to sue the Los Angeles and San Jose districts.

Additionally, Taylor last month filed a $15-million administrative claim against the Los Angeles Unified School District--representing the value of the contracts canceled by that district last June.

In its Chapter 11 filing, Taylor cited assets of $20 million and liabilities of $7 million. But the fleet of buses account for most of the assets, “and you can’t use a bus to pay your bills,” Berthold said.

First Interstate is the company’s largest single creditor, he said.

According to Berthold, Taylor’s problems began when the company refused to purchase additional liability insurance that names the school districts rather than his company as the insured party.

In its claim against the Los Angeles Unified District, Taylor alleges that the district trustees are violating state law by requiring the bus company to purchase insurance for the district and add the amount to its contract bid.

“If the state says I have to have a certain amount of insurance and I have it, then why should the district require me to buy more?” Berthold asked Monday. “Why should the taxpayers have to pay for it?”

Officials in the Los Angeles district have said they canceled Taylor’s contracts because they were not satisfied that the bus company’s insurance was adequate because one underwriter apparently was a self-insurance trust.