04-19-2011, 06:59 PM
Quote:Insurer for Clayton College of Natural Health says defunct school owes $100,000
Published: Saturday, April 09, 2011, 8:00 AM
Updated: Tuesday, April 12, 2011, 12:54 PM
By Stan Diel -- The Birmingham News
BIRMINGHAM, Alabama - A Wisconsin insurance company that provided tuition reimbursement insurance for the defunct Clayton College of Natural Health this week asked to intervene in a lawsuit against the college, claiming the school hasn't kept a promise to repay the company for losses related to the policy.
Birmingham's Clayton College had a total of $50,000 worth of tuition reimbursement insurance with Platte River Insurance Co. for students "suffering loss as a result of a breach of contract, fraud or misrepresentation ... or for any violation of any obligation due a student," according to the filing and a performance bond included in the court record.
But since the college closed unexpectedly last July more than 800 former students have filed claims with the insurance company, the insurer said in the U.S. District Court filing. "The total amount of the claims far exceeds the ... bond," the court filing indicates.
The college and the insurance company also had an indemnity agreement, which required the college to reimburse the insurance company for any losses related to the policy. According to Platte River's court filing, Clayton College contracted with the insurer to provide the tuition reimbursement insurance because it's required under Alabama law.
The insurer's filing asks the court to force the college and its founder, Lloyd Clayton, to pay it $100,000 to compensate it for current and expected claims. The lawsuit in which the insurer seeks to intervene was brought by four former students who claim about 5,000 students have lost "tens of millions" of dollars in tuition that can't be accounted for. The suit, which names the college and four former administrators as defendants, seeks class action status.
Efforts to reach attorneys representing the insurance company were not successful on Friday. Dan Sparks, an attorney representing the college and its former administrators, declined to comment. Sparks has said in the past that the tuition money in question went toward operating expenses at the school.
In addition to compelling payment of $100,000, the filing asks the court to:
Require the college and Clayton to account for all of their assets from the past five years.
Give the insurance company access to all financial records of the college and Clayton.
Place a lien on assets belonging to the college and Clayton.
History
The unaccredited, Southside-based Internet correspondence school offered undergraduate, graduate and doctoral degrees in natural health, holistic nutrition and wellness with students paying tuition ranging from $2,000 for certificate programs to $15,000 for combined bachelor's, master's and doctoral programs, according to the students' lawsuit. The private school had been on several state's "watch" lists for unaccredited schools, and had a pending application for accreditation with a U.S. Department of Education-approved accrediting agency at the time it closed.
College officials said at the time that the closing was a result of the poor economy, and not a new state law requiring degree-granting institutions to be accredited.
Named as defendants are Clayton and three other former members of the board of directors of Magnolia Corporate Services Inc., which was affiliated with the college. Board member Jeff Goin also served as president or CEO of the school, Kay Channell served as CEO or chief operating officer, and board member William Fishburne was an attorney for both Magnolia and the college, the filing said.
The named plaintiffs in the suit are Suzanne Goldberg, Juli Madacey, Michelle Reeves and Krista Walsh, former students from Michigan, Virginia and Massachusetts.