Vermont Captive Insurer Seeks Reinsurance Recoveries in Dispute with Lexington, Swiss Re Unit

A Vermont-domiciled captive insurer has filed suit in federal court seeking reimbursement from its reinsurers for defense and settlement costs arising from abuse-related claims tied to a former West Virginia boarding school.

According to a complaint filed in the US District Court for the District of Vermont, Gencon Insurance Company of Vermont alleges that Lexington Insurance Company, a subsidiary of American International Group, and Employers Reinsurance Corporation, a subsidiary of Swiss Re Corporate Solutions, failed to reimburse amounts Gencon paid under excess general liability policies and related facultative reinsurance agreements.

The dispute stems from lawsuits filed by former students of Miracle Meadows School, a now-closed boarding school in West Virginia. While the school was not owned or operated by the Seventh-day Adventist Church, the lawsuits named various church-affiliated organizations, alleging bodily injury arising primarily from nonsexual physical abuse, neglect, and inhumane living conditions. Some claims also included allegations of sexual misconduct by school staff, according to the complaint.

Gencon states that its claims administrator ultimately handled the matters under occurrence-based general liability policies rather than claims-made employment practices or sexual misconduct coverage. The filing further states that the claims were resolved through global settlements involving multiple claimants over several years.

According to the complaint, losses were allocated across policy years based on each claimant's initial year of attendance at the school, with amounts aggregated within each year to determine when excess general liability coverage was triggered. The excess policies were written on a follow-form basis and reinsured through facultative certificates for certain policy years.

The filing alleges that, to date, 177 claims have been settled for more than $86 million in total settlement payments, with defense costs exceeding $2 million. Gencon further states that it billed approximately $36.4 million to Lexington and $19.0 million to Westport for reinsurance recoveries that remain unpaid. According to the complaint, other reinsurers reimbursed the captive under the same allocation approach.

Gencon is seeking damages for breach of contract, breach of the implied duty of good faith and fair dealing, and a declaratory judgment regarding the reinsurers' obligations under the facultative reinsurance agreements.

The case is Gencon Ins. Co. of Vt. v. Lexington Ins. Co., No. 2:26-cv-00025 (D. Vt. Feb. 3, 2026).