USA Swimming Not on the Hook for $2.5 Million Settlement

As a follow-up to the earlier story about a judgement in favor of plantiff Brooke Taflinger to the tune of $2.5 million against USA Swimming and Central Indiana Swimming, it is unlikely that the money will come from USA Swimming, at least directly.

According to Taflinger’s attorney Jonathan Little, because “Lexington did not defend their insured Central Indiana Aquatics, they would have to pay the entire judgement, pending the result of the declaratory action.”

The declaratory action is a lawsuit seeking a court order that they do not have to pay.

Swimming’s insurance carrier, USSIC, is not licensed in the USA, so they contract with the Lexington Insurance Company (a part of the Chartis Company, which is a major subsidiary of insurance giant AIG) to ensure USA Swimming.

USSIC has agreed to reimburse Lexington for any losses that Lexington has to pay as a result of USA Swimming’s cases. This means that directly, it’s unlikely that any of the directly named parties in this morning’s judgement will be saddled with the $2.5 million cost: a major relief to those dependent on funding from the organizations. Approximately $3.50 of every USA Swimming membership due goes toward these USSIC insurance premiums.

USA Swimming says that in May of 2012 the judge summarily dismissed the case against USA Swimming and the school, but did not elaborate as to the nature of any other litigation involving their insurance company.

It is not uncommon practice for National Governing Bodies to have insurance through carriers outside of the United States; the Barbados, where USSIC is located, generally has less oversight than in the United States and can act as tax havens. These are similar reasons to why banking is so popular in these areas as well.