Insurance Company Sues To Avoid Payout In NC Molestation Lawsuit

Jul. 15--A federal lawsuit says Fayetteville automobile dealer Mike Lallier, who remains accused in South Carolina criminal court of molesting a teenage boy in September 2016, wanted to use his dealership's liability insurance to cover the costs from a civil lawsuit that a former employee filed in Cumberland County Superior Court.

The former employee contended in his lawsuit that he was wrongly fired from Reed-Lallier Chevrolet in Fayetteville for reporting the alleged molestation to police. The employee's case was settled privately out of court, records say.

The insurance company's federal litigation does not say how much the employee's case settled for, however, it says the dispute involves an amount of at least $75,000.

Universal Underwriters Insurance Co. did not want to pay costs from the fired employee's lawsuit. So it sued in U.S. District Court in February 2017 to obtain a court order specifying it is not liable for the costs under the insurance policy it issued for Reed-Lallier Chevrolet.

Its reasons:

--The company said the incident with the teenager did not meet the definition of a covered "occurrence" stemming from the operation of the dealership.

--The insurance policy does not cover dishonest or criminal acts.

--The insurance policy does not cover incidents in which someone at the dealership intentionally caused harm.

The defendants were Lallier, his father-in-law Gene Reed Jr., Reed-Lallier Chevrolet, two companies they own, Reed-Lallier Chevrolet, and the fired employee.

Lallier, Reed, the dealership and their two companies filed a response and a counterclaim. They said Universal Underwriters is bound by its policy to pay.

Among their reasons: Claims of wrongful termination are covered, they said, and the employee's lawsuit was about his being fired, not about any criminal activity.

In August of last year, U.S. District Judge James C. Dever III ruled that actions that Reed-Lallier Chevrolet took against the employee were "one step removed" from the alleged molestation, so the insurance company could be liable for costs from the fired employee's lawsuit. The case was not fully resolved and Dever ordered the parties to engage in mediation.

A document filed in March says Universal Underwriters reached an out-of-court settlement with Lallier and the other parties. However, as of Friday, federal court records showed the case still is pending.

Despite the fact that the case has not been dismissed, it may be resolved. Two lawyers said last week that when lawsuits are settled out of court, the plaintiffs sometimes forget to file a dismissal or never bother to.

Efforts by The Fayetteville Observer on Monday to reach the lawyers for Universal Underwriters, Lallier and Reed-Lallier Chevrolet were unsuccessful.

Prior to his criminal charge, Lallier was prominent in Fayetteville's social, business and political circles. He is a former chairman of the Fayetteville Public Works Commission, the city-owned electric, water and sewer utility.

The lawsuit from Universal Underwriters Insurance Co. is one of at least three court matters that remain open regarding Lallier and allegations of sexual misconduct.

The other two are Lallier's criminal case and an ongoing legal effort by the Observer to unseal yet another civil lawsuit filed against Lallier in connection to the criminal case.

In the criminal case, Lallier was charged in Darlington County, South Carolina, in early September 2016 with molesting a 15-year-old boy in a motorhome at the Bojangles' Southern 500 NASCAR race. An online court record says the case remains unresolved.

In the Observer's matter, several minors sued Lallier in November 2016 following his South Carolina arrest. A judge sealed all information about that case -- including such basics as the date it was filed and that it was against Lallier.

The Observer learned of the case by early January 2017. In July 2017, the news organization filed a motion to unseal the records. The N.C. Court of Appeals ruled last year the judge was wrong to completely seal the lawsuit and said the records, partly redacted if deemed necessary, must be released to the public.

A hearing on the release of the records is scheduled for for 11 a.m. July 31 in Cumberland County Superior Court.

Staff writer Paul Woolverton can be reached at pwoolverton@fayobserver.com or 910-486-3512.

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