Penn State sues insurance company, says it failed to cover Sandusky victims’ claims

mcarroll@centredaily.comMarch 6, 2013 

Penn State is suing one of its insurance providers, claiming the company failed to cover the university against claims by 30 men who have come forward saying Jerry Sandusky abused them.

The university filed the suit against the Pennsylvania Manufacturers’ Association Insurance Co. Tuesday in Centre County Court. Penn State is suing over breach of contract, anticipatory breach of contract and bad faith.

The lawsuit provides new details about the number of individuals who have contacted the university with claims about Sandusky. Several of the men have filed civil lawsuits. Two of the individuals came forward this year, the most recent on Feb. 2.

Penn State has hired a mediator, attorney Kenneth Feinberg, to negotiate a settlement with the individuals. Feinberg has said settlements may be reached by the end of this month.

The university, meanwhile, will pursue the lawsuit against its insurance company of more than 50 years.

“Having been a major client of PMA since the 1950s, Penn State is disappointed by the response of this insurance firm to the university’s situation,” Penn State spokesman David La Torre said in a statement.

“By refusing to honor its obligations to provide (full) coverage to Penn State, PMA has essentially abandoned a decades-long client,” La Torre said. “Penn State will aggressively pursue the coverage for which it has paid over $23 million since 1983 and to which it is entitled.”

Attorneys for the university said Penn State paid “substantial premiums to obtain the protection and comfort of a complete and unqualified defense and complete and unqualified coverage under acceptable law, and PMA has breached its duties ... by failing and refusing to provide that protection and comfort.”

The university contends that PMA’s refusal to honor its policy obligations is “frivolous and unfounded and not supported by the applicable law, policy language or facts.”

The university is seeking recovery for breach of contract and punitive damages and defense costs and fees. Although attorneys for the university were unable to provide an estimate of damages, they said the number will exceed $50,000.

Penn State has demanded a jury trial in the case.

La Torre said the university remains optimistic that insurance policies will cover Penn State’s defense of the Sandusky claims.

“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,” La Torre said. “Student tuition, taxpayer funds or donations will not be used.”

The 69-year-old Sandusky, a convicted pedophile, is in solitary confinement serving a state prison sentence of 30 to 60 years for sexually abusing young children, sometimes on Penn State’s campus.

Ex-university president Graham Spanier, former athletic director Tim Curley and retired senior vice president Gary Schultz face trial on counts of perjury, obstruction of justice, conspiracy, child endangerment and failure to report abuse for allegedly covering up the abuse. They will not see a trial until 2014.

Matt Carroll can be reached at 231-4631. Follow him on Twitter @Carrollreporter.

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