In light of the Freeh report’s statement that Penn State officials allegedly concealed sexual-abuse allegations against former assistant football coach Jerry Sandusky, the university’s insurer has said it would be contrary to Pennsylvania public policy to provide the university coverage under any insurance policy it issued.
The argument from Pennsylvania Manufacturers’ Association Insurance Company came Tuesday in a motion for leave to file a second amended complaint in a lawsuit stemming from the first civil suit naming Penn State as a defendant — Doe A v. Second Mile .
PMA had already made other arguments regarding coverage for the time frame in the Freeh report — from May 1998 onward — and years before it, but the public policy argument would be significant to litigation between Penn State and its insurance companies if the court rules it legally sound.
A federal judge has already ruled that Pennsylvania public policy precludes Sandusky from claiming coverage for damages from the insurer of his charity, The Second Mile, though defense costs remain undecided. The motion from PMA essentially aims to extend that analysis to Penn State following the findings of an investigation into the university led by former FBI director Louis B. Freeh.
Freeh’s 267-page report named former head football coach Joe Paterno, the university’s former president and two former high-ranking administrators as parties who “repeatedly concealed critical facts” after allegations surfaced against Sandusky in 1998 and 2001.
Sandusky was convicted of 45 counts of sexual abuse last month. Former athletic director Tim Curley and former vice president of business and finance Gary Schultz await trial on failure to report child abuse and perjury charges.
“Here, it is not alleged that any agent or officer of PSU was guilty of molesting minors,” the insurance company said in a memorandum of law supporting its motion. “However, there is substantial evidence that beginning at least as early as May 1998, PSU, through its high-ranking officials, permitted the molestation of minors to occur and continue by concealing knowledge of Sandusky’s activities from authorities and the public by choosing not to warn the public of Sandusky’s behavior or to remove him from access to minors on the university campus.”
The insurer also argued that by not disclosing to PMA what the Freeh report says university officials kept from police, Penn State failed to disclose to PMA “information material to the insured risk.”
“There can be little doubt that knowledge that a key employee such as Sandusky was involved in acts relating to the sexual abuse and/or molestation of minors would be deemed material to the insured risk by PMA,” the insurer said in the filing. “PSU’s deliberate failure to disclose this information to PMA constituted misrepresentation.”
The case of Pennsylvania Manufacturers’ Association Insurance Company v. Pennsylvania State University has been a testing ground for a number of key insurance issues, as the university awaits a likely wave of civil action following Sandusky’s conviction.
PMA initially sued Penn State in Philadelphia in January, seeking a declaratory judgment limiting defense costs and indemnity for which the university could claim coverage in the Doe A case.
Penn State followed with its own separate legal action, alleging PMA breached its contract with the school and acted in bad faith both by initially denying coverage and then following with a lawsuit. It asked for a Centre County jury to decide all matters triable by jury.
A venue dispute ensued, and Penn State lost at the trial level on two occasions. First, Philadelphia Court of Common Pleas Judge Arnold L. New granted PMA’s request to coordinate and transfer the lawsuit to Philadelphia April 10. Then, Philadelphia Court of Common Pleas Judge Gary S. Glazer denied a request from the university to rope proceedings to Centre County.
Penn State has appealed New’s decision to the state Superior Court.
The university has used PMA for yearlong commercial general liability insurance policies, starting in the 1950s and continuing through the present, according to PMA’s complaint.
In PMA’s first complaint, the insurer pointed to the “abuse or molestation” exclusion in a 1992 policy the school inked, which was the second of three consecutive general liability policies at issue.
The 30-year-old alleged victim, according to his court filing, has accused Sandusky of sexually abusing him “over 100 times” between 1992 and 1996. Doe A has since been identified publicly as Travis Weaver, who told his story on NBC’s “Rock Center” on the eve of Sandusky’s guilty verdict. Weaver was not one of the 10 victims prosecutors used in their case against Sandusky.
Exactly when in 1992 Sandusky allegedly started abusing Weaver will affect PMA’s case.
According to court filings in both PMA and Doe A , here’s how things could shake out:
According to the complaint in Doe A , the abuse started some time into 1992, two months into which the 1992 policy — along with its “abuse and molestation” exclusion — came into effect.
Therefore, if it were to be established that the alleged abuse by Sandusky in Doe A started before March 1, 1992, then Penn State could claim coverage under a previous policy wherein a sexual-abuse exclusion was not present. That policy has been referred to in both court filings as the 1991 policy.
There was also a 2004 policy, under which Penn State initially sought coverage before the lawsuits were filed, claiming a “‘continuous trigger’” theory, according to the original PMA complaint. This would mean that allegations in Doe A’s lawsuit triggered coverage under any policy from the time the victim was allegedly first molested through the time period in which he suffered as a result of the abuse.
PMA disputed that theory in its intial lawsuit, saying Doe A’s allegations only trigger the policy in place when the alleged abuse started. The public policy argument, citing the findings of the Freeh report, would also dispose of the 2004 policy if PMA prevails.
Therefore, as previously reported, there appears to be a two-month window in which the insurance company would have to defend and indemnify the school, as it has acknowledged in court filings.
Asked for comment on the public policy argument, PMA attorney Steven J. Engelmyer of Philadelphia firm Kleinbard Bell & Brecker said, “Our pleading fully sets forth my client’s position on this matter,” and declined further comment.
Jerold Oshinsky, a Los Angeles attorney with Jenner & Block, represents Penn State along with Joseph P. Green of Lee Green & Reiter in State College.
Neither Oshinsky nor Green returned a call requesting comment on the recent filing.