Penn State Sues PMA Insurance Co. Over Legal Costs From Sexual Abuse Lawsuit

Pennsylvania State University has filed a countersuit against the writer of its commercial general liability policy, alleging Pennsylvania Manufacturers' Association Insurance Co. has refused to cover legal costs stemming from the ongoing child sexual abuse case against former assistant football coach Gerald Sandusky.

The countersuit comes in response to a suit filed by PMA on Jan. 31 that sought to have the court excuse it from obligations to defend and pay for a civil lawsuit filed against Penn State in connection to the Sandusky matter. In that lawsuit, PMA said only one policy should apply, and even then Penn State may not be covered under exclusions including "abuse and molestation," "intentional acts" and "known loss."

Sandusky is also facing criminal charges for allegedly abusing a number of young boys participating in the Second Mile charity organization he founded.

According to Penn State's complaint, filed in the state court for Centre County, Pennsylvania, the university has purchased one-year CGL policies from PMA since the 1950s. But despite that long relationship, the complaint says, "PMA failed to provide coverage for which PSU bargained and paid."

Jerold Oshinsky, a partner with Jenner & Block which is representing Penn State, told Best's News Service the complaint hinges on the question of whether one or more of the policies purchased by Penn State should provide coverage. Oshinsky said his client believes more than one policy should apply. "PMA has agreed to defend the university under one policy. But we have the right under the policy language to select the policy here," Oshinsky said.

The policies sold to Penn State from 1992 until the present contains a $2 million "per occurrence" limit and a $3 million aggregate limit. The complaint said the earliest known alleged sexual abuse victim in the civil case against Penn State alleges he was abused in 1992. Because Sandusky has been accused of sexually abusing young boys over a decades-long period, the complaint argues PMA owes Penn State defense and indemnification under each of the policies over that period.

"We want to stress that there have been no developments concerning the facts surrounding the allegations at this stage. But we believe the allegations should be enough to require PMA to provide a defense under the policies it issued," Oshinsky said.

Oshinsky compared the reasoning behind the complaint to litigation stemming from asbestos and environmental cases, which he said generally involved insurance companies trying to limit how much coverage it should be required to provide. "This is just a replay," Oshinsky said.

Penn State has said on a university-run website that it has paid $3.2 million on expenses related to an investigation it conducted into whether the university was involved in covering up the alleged abuse and related legal and public relations advice. Oshinsky said he did not have a breakdown as to how much of those expenses should be covered under the CGL policy, but the complaint said the figure exceeds $50,000.

The university's complaint against PMA alleges several counts of breach of contract and bad faith. The complaint seeks actual as well as punitive damages in addition to legal fees.

Efforts to reach a spokeswoman for PMA and the company's lawyer Steven J. Engelmyer of Philadelphia-based Kleinbard Bell & Brecker were unsuccessful.

Pennsylvania Manufacturers' Association Insurance Co. currently has a Best's Financial Strength Rating of A (Excellent).

(By Jeff Jeffrey, Washington Correspondent: [email protected])