Penn State sues Pennsylvania Manufacturers' Association Insurance Co. over coverage denial

By Jon Campisi | Mar 8, 2013

Pennsylvania State University has filed a breach of contract suit against its longtime

insurer over allegations that Pennsylvania Manufacturers’ Association Insurance Co. refused to cover the school with respect to litigation arising out of the Jerry Sandusky child sex-abuse scandal.

Lawyers from Jenner & Block LLP, which has offices in Chicago and Los Angeles, and attorneys from Bellefonte, Pa.-based Lee, Green & Reiter filed the civil action on behalf of the university March 5 at the Centre County Court of Common Pleas.

A university spokesman supplied the Pennsylvania Record with a copy of the lawsuit.

The complaint accuses PMA of failing and refusing to honor obligations owed to Penn State under comprehensive and commercial general liability insurance policies with respect to the tort action filed against the school in the wake of the child molestation scandal involving Sandusky, the former defensive coordinator for the Nittany Lions football team.

“Despite the substantial insurance premiums that Penn State paid PMA over the course of those years, when various individual claimants began to raise claims and file lawsuits against Penn State concerning the alleged sexual misconduct of Sandusky, PMA failed to provide the coverage for which Penn State had bargained and paid,” the lawsuit reads.

The university has been paying general liability policies to PMA for consecutive 12-month periods for more than 50 years, the suit states.

Instead of indemnifying Penn State in the civil cases initiated against Sandusky and his former employer, the complaint asserts, PMA denied coverage or reserved its rights in response to certain suits and has failed to issue any coverage determination in response to others.

In a statement provided to the Pennsylvania Record, university spokesman David La Torre said that Penn State is disappointed by the insurance firm’s response to the school’s situation.

“By refusing to honor its obligations to provide [full] coverage to Penn State, PMA has essentially abandoned a decades-long client,” La Torre said in his statement. “The University continues to believe its General Liability and Directors & Officers insurance policies will cover the defense of claims brought against the University and its officers, employees and trustees.  Student tuition, taxpayer funds or donations will not be used.”

La Torre said the school would aggressively pursue the coverage for which it has paid more than $23 million since 1983 and to which it is “entitled.”

The lawsuit spells out the cases of 30 separate individuals who are either suing, or are planning to sue, the university over claims relating to the Sandusky sex-abuse scandal, as well as a class of potential future plaintiffs who may sue down the line.

Penn State had timely provided PMA written notice of each of the underlying claims listed in the suit, its lawyers wrote, but that PMA has not provided nor has it agreed to provide any coverage to the university with respect to any of the claims.

The suit contains counts of breach of contract, anticipatory breach of contract and bad faith.

The university seeks unspecified compensatory damages, attorneys’ fees, costs and interest.

Sandusky, who is in his late 60s, is currently serving between 30 and 60 years in state prison.

The former collegiate assistant football coach was convicted last summer on 45 counts of child sex-abuse.

His lawyer’s are appealing their client’s conviction in state Superior Court.

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