White House Life & Casualty
York, Byron
"White House Life & Casualty" Last year Bob Bennett was faced with a tricky problem: What to do about a client who can't pay his bills? By the middle of 1995, the Washington super-lawyer had run up more than...
...For one thing, State Farm and Chubb didn't hire Bill Bennett...
...Since the fund's rules require disclosure of all receipts and expenditures, the reimbursement was sure to become known...
...Because of some peculiar features of the Jones suit, Bennett concluded that both policies might cover Clinton's expenses...
...Were the case to go to trial, and the jury to find against the president on all counts, that would be the insurance companies' maximum liability...
...Suing State Farm and Chubb might easily turn into a political disaster for Clinton: it would at the very least attract widespread media attention, while the Clinton/Bennett strategy has always been to keep the sordid affair out of the news as long as possible...
...30 June 199 6 • The American Spectator client's policies," he says, adding that any attempt to persuade him to reveal information about the Clintons' insurance is "a dead-end street...
...Standard Procedure...
...Clinton and his employees, Jones says, "maliciously and willfully" defamed her...
...Not only is his lawyer in the Jones case getting the big checks from Chubb and State Farm, his lawyers in the Whitewater case are receiving substantial help from the Presidential Legal Expense Trust...
...All you have to do is pick up the papers and you see all the nonsense about the Whitewater deal and the Kenneth Starr inquisition...
...the standard State Farm policy says, "We will not provide insurance for personal injury or property damage to any person or property which is the result of your willful and malicious act, no matter at whom the act was directed...
...In a nervous executive's mind, the matter might conceivably turn into some sort of career-ending PR debacle...
...Then—press secretary Dee Dee Myers told reporters the allegations were "just not true," and another aide called the suit a "cheap political trick...
...Instead, they were asked to pay for a defense that they had no part in creating...
...In 1992, he was sued by Marsh & McLennan, his long-time firm, after he abruptly resigned and took several Marsh & McLennan clients with him to his new firm, Rebsamen Insurance (Herget won the suit...
...And insurance companies are not in the business of publicizing the fact that they do deny claims by policy-holders...
...Given the State Farm-Chubb payments to Clinton in the same suit, the question arises: Does Danny Ferguson have insurance...
...Ferguson's statement that Jones had agreed to be Clinton's girlfriend, and his innuendo that she had willingly participated in a sexual encounter, were knowingly false...
...Remember the $200,000 the president's legal defense fund had sent Bennett...
...No," says State Farm's Michael Bragg...
...The suit's language even mirrors the words in the State Farm policy...
...In the future they'll have grounds to argue that their clients should receive the same treatment...
...One of them was an expired policy with Pacific Indemnity, a division of the Chubb Group of Insurance Companies...
...I think it came as once policies," Clinton lawyer Bob Bennett says...
...He served as chairman of the campaign in 1980 (the losing one) and was a major fund-raiser for the others...
...Paula Jones filed suit on May 6, 1994...
...v. Michael, a 1993 decision involving an automobile accident, a federal district judge ruled that State Farm had no obligation to defend a policy holder because (1) he didn't inform State Farm about the original accident, and (2) he waited two months to notify the company that he had been hit with a lawsuit...
...Given the money involved and all the reasons to deny coverage, that explanation has led to more than a little skepticism among those who follow the insurance industry closely...
...Third, insurance companies routinely deny coverage to clients who do not make claims in a reasonable amount of time...
...State Farm says it received notice from Bennett on June 8, 1995...
...Every contributor of more than $200 is asked to disclose his occupation and employer...
...They are limited to $1,000...
...The legal defense fund set up a stringent set of rules governing contributions...
...Ferguson says he is not aware of any insurance he has that might cover his expenses, and besides, nothing much has been happening in the case from his point of view...
...Corporate bureaucrats hate bad PR—and what case could be higher profile than one involving the president of the United States...
...The American Spectator • June 199 6 A Clinton Coincidence To hear Bennett tell it, the turnaround in the president's fortunes started with a splendid coincidence...
...Bennett] sent us a letter on June 8, 1995," says State Farm's Michael Bragg...
...The $1 million covers any damages that might be levied against Clinton should he lose the case...
...Herget, a close friend of White House adviser Mack McLarty, is a Little Rock insurance executive who has supported Clinton since the beginning...
...Giller says there is ample case precedent for companies to deny coverage on a sexual harassment claim...
...First, the Jones lawsuit charges Clinton "discriminated against [Jones] because of her gender by sexually harassing and assaulting her on May 8, 1991...
...Ferguson and his lawyer, Bill Bristow, are essentially sitting around while Bennett & Co...
...No insurance company has an obligation to pay millions for defense in a case like that...
...Also, a lawsuit on the coverage issue would undoubtedly turn into a lawsuit on the substance of the suit, and that is something Clinton has consistently tried to avoid...
...I've never added it all up, but that's probably right," he answered...
...Everything Jones alleges is the result of an intentional act on Clinton's part...
...But neither Bennett nor the insurance companies will reveal who broker that has dealt with them over the years...
...it might easily run into the millions of dollars...
...State Farm says it received notice from attorney Bennett on June 8, 1995...
...The rules were designed to protect against the possibility that contributors might attempt to buy favor with the president...
...And I feel badly that twenty years of our hard effort and savings may go away...
...The discovered the policies and how they were brought to Bennett's attention...
...HOUSE ASUALTY Last year Bob Bennett was faced with a tricky problem: What to do about a client who can't pay his bills...
...If State Farm and Chubb refuse to cover an ordinary citizen, nobody would know about it...
...When we met with them and told them we thought we had a duty to defend, they said okay and gave us the bills they had accumulated up to that point," Bragg says...
...A week later, the fund sent the $200,000 to Williams & Connolly for the Whitewater defense...
...By the end of the year, however, things had changed dramatically...
...The idea, of course, was to keep the Jones embarrassment out of the news until after the November election, but it was a very expensive course to pursue...
...Now look at the Jones lawsuit...
...State Farm and Chubb staffers went through all the bills, approving payment of $891,000 (but refusing to pay for another $157,000 of Bennett's bills, most of which involved charges for talking to the press...
...Again, Chubb would not comment on its role in the case, but Bragg says the two companies made their decisions independently...
...But what happens when the policy-holder--Clinton — says the events just didn't happen...
...While that's certainly possible, it is also true that insurance companies depend less on the good will of the federal government than some other major industries...
...Chubb again refuses to comment, but State Farm executives say they simply made their decision based on their obligations to the policy-holder...
...Nothing was made public, and the payments remained a secret until a series of events forced them into the open in early February...
...Insurance companies routinely deny coverage to clients who do not make claims in a reasonable amount of time...
...You can't talk about a 2Herget's business dealings have set off a number of controversies within the Little Rock business community...
...how many other "constitutional" cases is State Farm paying to litigate...
...As far as I know there policy was in effect from February 5, 1988, until February 5, 1992...
...Just when the president's Paula Jones bills were moving toward $1 million, one of Clinton's Arkansas friends in the insurance business happened to be looking at the first couple's insurance situation...
...A look at the president's long-time friends in the insurance business brings up the name of Richard Herget, Jr.—a well-known figure in Little Rock whose name rarely comes up in Washington reporting on Clinton...
...The American Spectator • June 1996 31 filed against you, notify your underlying insurer and us right away...
...These carriers say, 'We are the rock,' and `You're in good hands," says Robert Carter...
...Anybody could say, 'I didn't do it, therefore you have to provide a defense for me,' but the carrier is bound by the allegations and the known facts...
...Bennett] ran up $900,000 in bills to delay the prosecution of the case," says one lawyer who has watched the proceedings...
...Yet State Farm and Chubb have already spent nearly $900,000 on Bennett's defense...
...Despite the White House denials and statements claiming the president had never met Jones," Stewart writes, "[settlement] negotiations got to the point where Clinton agreed to read personally a statement that apologized but didn't concede Jones' version of events...
...Again, no...
...The President's Co-Defendant Few people remember that Paula Jones is suing two people in her sexual discrimination case: Clinton and Danny Ferguson, the Arkansas state trooper she says invited her into the room for her encounter with the governor...
...Now that Chubb and State Farm, for whatever reasons, have decided to defend Clinton, do they have a say in how the case is handled...
...It was hard to see where more cash to defend the Jones case might come from...
...If they turn down Bill Clinton, everybody would know about it—courtesy of media master Bob Bennett...
...Clinton waited more than a year...
...State Farm and Chubb split the cost down the middle...
...Off to the Poorhouse...
...In 1992, he raised money for the Clinton-Gore campaign...
...In her suit, Jones says: "Defendant Ferguson's statements likewise maliciously and willfully defamed [Jones] and damaged her good name, character, and reputation...
...The fund will not accept contributions from federal employees or registered lobbyists...
...Since nothing has been decided in court, doesn't that oblige a company to defend him...
...The Chubb policy was in effect on May 8, 1991, the day Jones says Clinton exposed himself and propositioned her in a Little Rock hotel room...
...Most of that money has been spent on the constitutional issue," he says, "and you can't hire the same type of lawyer to handle a rear-ender or a slip-and-fall as you would a constitutional case that may end up in the Supreme Court...
...Jones filed suit on May 6, 1994...
...How did it happen...
...And why is State Farm accepting Bennett's position that the case is a constitutional matter in the first place...
...Count Four alleges that in February 1994, as word got out that Jones planned to sue the president, Clinton directed his staff to brand her a liar...
...The corporate mindset might well advise spending the money—after all, a million dollars is a small price to pay to avoid a mess...
...That means the insurance company hires the lawyer, okays the defense, and decides to settle if it determines that would be best...
...By the middle of 1995, the Washington super-lawyer had run up more than $900,000 in legal charges defending Bill Clinton against the Paula Jones sexual BYRON YORK is a writer and television producer in Washington...
...Every lawyer who represents policy-holders in suits against insurance companies knows State Farm and Chubb bent the rules to pay the president's bills...
...Who's in Charge...
...By normal standards, they should have a lot of say—it's their money...
...Even so, things could be much, much worse for Clinton...
...Bennett's strategy was to avoid the substance of the suit and argue instead that the president cannot be sued while in office—a constitutional issue sure to end up in the Supreme Court and thus drag on into 1997 June 1996 • The American Spectator The story of Washington and Arkansas insiders and two very friendly insurance companies who came to Bill Clinton's rescue in the Paula Jones sex harassment case...
...The Jones lawsuit asks for a total of $700,000 in damages...
...28 harassment lawsuit...
...Settling would save them a lot of money right now—and more in the future...
...Insurance protects the policy holder against accidents and unforeseen occurrences...
...Clinton could afford to be magnanimous...
...In State Farm Fire and Cas...
...Of course he felt bad for himself, he said, but "I feel a lot worse about all the innocent people who work here who don't make particularly high salaries and don't have the net worth that we brought here who had to hire lawyers and pay legal fees, too...
...Herget refers any further questions to David Kendall, the president's Whitewater lawyer...
...But it was just the beginning...
...He is now being sued by Rebsamen...
...Others guess that the insurance companies stand to receive some sort of direct benefit by staying on Clinton's good side...
...The Jones case was still crawling through the courts, but Bennett's firm was sitting pretty, having pocketed $891,000 for the president's defense courtesy of two of the nation's largest insurance companies...
...But if I stay healthy, I'll be able to pay my bills and earn a pretty good living...
...It's not clear what the president could do to pay them back...
...those that are received anonymously are donated to charity...
...Bennett says he knew nothing about the search—and says it was not related to the Jones case...
...If a claim or suit is "Sexual harassment is clearly not covered under any insurance policy I'm aware of," says Richard Giller, a Los Angeles attorney who represents insurance companies...
...agent...
...It wasn't about the suit," he says...
...The Chubb 29 the first lady were totally "Somebody had checked through all of their prior insur- unaware they had these policies," he told the Wall Street Journal in February...
...The Payoff Whoever placed it, the call from Little Rock set off an extraordinary series of events...
...But it does not include the cost of defending against the suit...
...The policies make clear that once an insurance company has decided to defend a policyholder in a suit, the company is in virtually complete control of the proceedings...
...The Presidential Legal Expense Trust, the fund set up to raise money for Clinton's defense, sent Bennett $125,000 back in December 1994, and then kicked in another $75,000 in May 1995...
...Had the client been anyone other than the President of the United States, Chubb and State Farm would not be providing the defense," says Robert Carter, a Washington lawyer who represents policy holders in disputes against insurance companies...
...wasn't any contact between the agent and the client," says Michael Bragg, vice president and counsel in State Farm's General Claims department...
...Later, he left Rebsamen for yet another company, and again took several clients with him...
...She charges that Ferguson was the source of the following portion of David Brock's story of Troopergate, "Living With the Clintons," published in the January 1994 issue of TAS: One of the troopers told the story of how Clinton had eyed a woman at a reception at the Excelsior Hotel in downtown Little Rock...
...32 June 1996 • The American Spectator Does State Farm normally hire lawyers at $475 an hour...
...Bragg says the nature of the case justifies the big bill...
...At that point Jones and her lawyers added a defamation count to the lawsuit, alleging that the staffers' comments "damaged her good name, character, and reputation...
...Despite its great value, Bennett says, the president had forgotten about the insurance coverage...
...they sent the checks in December...
...He met Clinton when McLarty invited him to a campaign breakfast in 1974 during Clinton's unsuccessful campaign for Congress...
...Somebody had checked through all of their prior insurance policies," Bennett says...
...It's an intriguing statement...
...The two-month delay, State Farm argued, was simply too long...
...When the Jones case is mentioned, Herget says, "I think the whole thing is just ridiculous, just character assassination!' Herget declines to answer when asked whether he played a role in the events that ultimately led Chubb and State Farm to pay for Clinton's defense...
...But a spokesman defended the president's statement, saying Clinton's other legal bills are so large that he could still go broke paying them...
...But in the long run, State Farm and Chubb might regret their decision...
...Nearly all of the lawsuit concerns events that happened on that day.1 But the last portion of Jones's suit involves events that happened much later...
...They asked us to pay for things that were incurred before we had an opportunity to participate...
...At this point, State Farm and Chubb have not committed in advance to paying any damage award that might result, but they have determined they have a "duty to defend"—that is, an obligation to cover the cost of Clinton's legal bills...
...Some quite a surprise to them...
...Bennett returned the money on February 8, which was precisely the day the Wall Street Journal published a front-page story revealing the insurance payments...
...Chubb's policy reportedly excludes sexual harassment, and while State Farm's standard policy does not specifically refer to sexual harassment, it does say "we will not provide insurance for any loss caused by illegal discrimination...
...The broker was] just taking stock of what they had...and came across these policies...
...With $900,000 down and more on the way, it's easy to shed a tear for the little guys who don't get sweetheart deals from their insurance companies...
...once State Farm and Chubb sent the checks, fund officials asked Bennett to return the $200,000...
...After that, Herget worked in Clinton's victorious 1976 campaign for attorney general and every campaign for governor...
...And it will not accept contributions from corporations, partnerships, political action committees, or labor unions...
...It was an enormous tab—an indication that the $475-per-hour Bennett and his lower-priced associates had spent thousands of hours on Clinton's defense...
...argue the "constitutional" issue...
...For its part, Chubb will not comment on the Clinton case...
...They have not gotten a single substantive ruling on whether he's liable or not liable...
...In September, Bragg, Bennett, and executives from Chubb met in Washington to work out the arrangements...
...Nonetheless, a circumstantial case can be made that the anonymous insurance adviser came not from inside the companies but from Clinton's political circle in Arkansas, where a supporter of the president, unhappy with the variety of allegations brought against Clinton in recent years, had the idea that the policies might be helpful...
...The State Farm policy picked up on the day the Chubb policy expired and is still in effect...
...Each policy protects Clinton for up to $1 million...
...It's as simple as that...
...Yet when two giant corporations pitch in $900,000 for the same cause—Clinton's legal defense—no such ethics rules apply...
...The standard State Farm policy says: "We may not provide coverage if you refuse to notify us of a claim or suit...
...So Bennett reasoned that the State Farm policy might also cover the lawsuit...
...According to the trooper, who told the story to [fellow troopers] Patterson and Perry as well, Clinton asked him to approach the woman, whom the trooper remembered only as Paula, tell her how attractive the governor thought she was and take her to a room in the hotel where Clinton would be waiting...
...Since the State Farm policy began when the Chubb policy expired, it was the policy that was in effect when the alleged defamation occurred...
...Is that standard procedure...
...A recent Arkansas case is instructive...
...He won't say how much Ferguson has spent on his legal defense...
...And all that advertising, millions and millions of dollars of it, becomes undercut when you've got the front page of the New York Times and the Wall Street Journal saying that even the president of the United States can't expect his insurance company to be there in rough times...
...I just think it's a bunch of malarkey," he says of the Whitewater investigation...
...In March, a federal appeals court agreed with lower court rulings rejecting Bennett's assertion that the president cannot be sued while in office...
...Some broker that has dealt with them over the years...
...After all, the thinking goes, what company would want to cross swords with the president of the United States...
...Instead, they are closely regulated at the state level, and thus pay close attention to the workings of each of the fifty state governments...
...It seems a baffling decision: How could two big insurance companies decide that a client's umbrella policy covered a case in which he is accused of coming on to an unwilling woman in an overtly sexual fashion...
...Eight hundred ninety thousand dollars is a whale of a lot of money to spend on a defense," Bragg says...
...By the end of last year, the fund had received donations totaling $971,941...
...But they can be worth far more than that...
...Rather, the most plausible explanation is that the decision was the product of simple corporate timidity...
...The fund does not accept anonymous contributions...
...They can spend as much as they want on the defense...
...They attached a copy of the lawsuit and said 'please review this.'" Bragg says it did not take State Farm long to decide to pay for the president's defense...
...Second, the policies specifically do not cover any intentional act...
...It struck us pretty quickly," he says...
...But "we concluded that had we been notified promptly we would have incurred the same legal expenses that they did...
...Both were "personal liability umbrella policies," which offer extensions of the standard liability protections included in most homeowner or renter policies...
...The other was a current policy with State Farm...
...In the short run, the strategy worked...
...As an independent insurance broker who sells Chubb policies, Herget was Clinton's personal insurance man for years (and also McLarty's).2 He is angry about what he views as unfair investigations of the president...
...The White House later conceded that the president knew about the State Farm and Chubb payments at the time of the news conference...
...Some have speculated that Bennett's actions intimidated State Farm and Chubb—and perhaps even stirred fears of a lawsuit if they refused to pay...
...So if both companies had ample grounds to deny coverage, why did they instead agree to pay...
...An insurer's obligation to provide a defense is based upon the allegation of misconduct," he says...
...No, says Giller...
...In the Jones case, not only do the allegations involve intentional acts, but there is evidence that Clinton has been willing to concede some involvement...
...It's likely that scenario is an overstatement...
...But contributions were slowing, and fund managers were sending more money to the Whitewater defense team headed by David Kendall at Williams & Connolly...
...Other policies, known as "claims made" policies, cover only claims submitted to the company during the time the policy is in effect...
...An incident like that is simply not covered by insurance...
...Not with that delay...
...Based on that, the insurance companies could insist that Clinton defend himself on the allegations in the suit and be done with it...
...The The American Spectator • June 1996 answer is no...
...We may investigate, negotiate and settle a claim or suit covered by this policy," the standard State Farm policy reads...
...Kendall refused to comment...
...The president and 'Even though the policy later expired, Clinton was allowed to make a claim because it was something known as an "occurrence-based" policy, meaning that it covers injuries suffered during the time the policy was in effect—even if the claim was made when the policy was no longer in effect...
...Or they could settle...
...But that doesn't seem to be the case in the Clinton affair...
...It was a sizable stack of paper...
...At his January news conference—the one in which he failed to mention the insurance payments—Clinton spoke at some length about the burdens of legal defense in today's Washington...
...At a news conference in January, the president was asked about a Money magazine report that the cost of defending himself in the Jones and Whitewater affairs has left him nearly bankrupt...
...after a few days in the news, the story disappeared...
...Yet in Clinton's case, a delay of more than one year was somehow acceptable to State Farm and Chubb...
...In the recent book Blood Sport, James Stewart reports that Clinton and Bennett tried to settle the case out of court even as Clinton was denouncing it...
...The decision seems all the more curious when one looks at the several legitimate reasons State Farm and Chubb had to turn Clinton and Bennett down...
...On this particular evening, after her encounter with Clinton, which lasted no more than an hour as the trooper stood by in the hall, the trooper said Paula told him she was available to be Clinton's regular girlfriend if he so desired...
...Given the highly unusual circumstances of the payments, a close reading of ethics standards in today's Washington might view the money as little more than a gift from State Farm and Chubb to the president...
...Was it a State Farm search, he says, was not related to the Paula Jones case...
...Late last fall Bennett met with fund officials to tell them about the insurance...
...BY BYRON YORK and perhaps beyond...
...We decided in less than a month...
...The judge agreed...
...04 33...
...Sexual harassment is clearly not covered under any insurance policy I'm aware of," says Richard Giller, a Los Angeles attorney who specializes in representing insurance companies...
...Nothing has happened because the president's lawyers have taken that position," says Bristow...
...It will not solicit contributions...
Vol. 29 • June 1996 • No. 6
