Penn State sues insurance carrier over claims stemming from Sandusky sex-abuse case

By Jon Campisi | Feb 22, 2012

Pennsylvania State University has filed a lawsuit against its insurance company, claiming the defendant breached its duties when it filed its own civil action against the educational institution late last month seeking a judge’s declaration that the insurer doesn’t have to cover the school in yet another civil suit filed by an alleged victim of accused child molester Jerry Sandusky.

Sandusky, the university’s former assistant football coach, stands accused of sexually abusing minors during a period of time dating back to the 1990s.

On Jan. 31, Blue Bell, Pa.-based Pennsylvania Manufacturers’ Association Insurance Co. filed suit in Philadelphia’s Court of Common Pleas seeking declaratory relief against Penn State.

The insurance company disputes that Penn State is entitled to coverage in a case brought by a man named only as John Doe A, who filed his own lawsuit in late November.

Doe, who claims he was a victim of Sandusky’s, named Penn State as a defendant in the lawsuit. The main defendant in the case was The Second Mile, the Centre County, Pa. charitable organization that benefits disadvantaged youth and was founded by Sandusky.

The insurance company, in its Jan. 31 filing, claimed that university officials approached it in early January of this year and made a claim for coverage and defense under a 2004 policy.

The company claims that Penn State sought coverage under what is known as a “continuous trigger” theory, which says that allegations in the Doe complaint triggered coverage under any policy in place from the time Doe was allegedly first molested by Sandusky through the entire period that he actually sustained injuries.

The insurer disagreed with the university’s assessment, and subsequently filed its civil action seeking declaratory judgment saying it wouldn’t be on the hook for any potential damages arising from the Doe litigation.

Penn State’s suit against the insurer contains counts of breach of contract and bad faith.

“PSU has been damaged by PMA’s breach by, among other things, being denied the benefits of the insurance coverage for which it contracted, that are required by law, and for which PMA collected substantial premiums, and PSU has been forced to incur the substantial burden and expense of bringing and pursuing this action,” the complaints alleges, according to a report in the Legal Intelligencer.

A copy of the complaint, which was filed Feb. 15 at the Centre County Court of Common Pleas by California attorney Jerold Oshinsky and State College, Pa. attorney Joseph P. Green, was not immediately readily available.

Oshinsky was quoted in the Intelligencer as saying that PMA, both in its denial of coverage to Penn State and in its civil action, had set forth an “erroneous construction of the contracts it had with the school.”

In an interview with the Pittsburgh Tribune-Review, Penn State Senior Vice President for Finance and Business David Gray said the school contends the insurance company’s own lawsuit is “without merit.”

“Despite substantial insurance premiums paid by the university to PMA over decades, PMA has refused to provide the coverage for which the university is entitled,” Gray told the newspaper. “We are extremely disappointed that rather than act in good faith with its insured, PMA instead chose to file an anticipatory lawsuit against us.”

Penn State’s suit, according to the Tribune-Review, was filed because the university “seeks to enforce its rights under its PMA policies and is in sharp contrast to PMA’s tactical action.”

Penn State has been hit hard by the Jerry Sandusky child sex-abuse scandal ever since it started unfolding late last year.

Numerous civil actions have been filed against the school and The Second Mile since Sandusky was arrested and charged following a grand jury indictment in November.

Sandusky awaits trial, as do two former Penn State officials charged with perjury for allegedly lying to a grand jury investigating the former defensive football coordinator.

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