Jerry Sandusky Scandal

Penn State insurance decision has big money impact

CDT photo

A judge’s ruling in an insurance dispute between Penn State and Pennsylvania Manufacturers’ Association Insurance Co. is gaining attention for one line that alleged late coach Joe Paterno may have known about sexual abuse by Jerry Sandusky as early as 1976.

But that’s not actually what the document is about.

Philadelphia Judge Gary Glazer’s order is actually a decision about who pays for what in the nest of claims in the case.

According to the university’s audit report from 2015, there are 32 claims that have been paid out to the total tune of $92.8 million. Of that, $33.2 million was reported paid during the active period of that audit.

“Additional claims could be paid in the future but without having knowledge of the number and nature of such claims the university is unable to predict the outcome of these matters or the ultimate legal and financial liability and at this time cannot reasonably estimate the possible loss or range of loss,” read that audit.

No lawsuits from alleged victims are pending, according to the university.

But why use the word “alleged”? The retired defensive coordinator was convicted of 45 counts of child sex abuse crimes in 2012, right?

Yes. Those 45 counts relate to 10 boys, and incidents that occurred between September 1995 and the summer of 2009.

However, Glazer’s order points to many more people and claims that include 1976, 1987, 1988, 1998 and 2001.

The order comes from the case filed by Penn State against PMA, its liability insurer, in February 2012, months before Sandusky’s conviction, after the Blue Bell-based company said it didn’t want to pay civil claims. PMA filed its own case in January 2012 in Philadelphia, asking the court to free it from paying for costs in a John Doe suit.

Penn State said then that “PMA failed and refused to provide coverage for which PSU bargained and paid for.”

Glazer granted and denied claims for both the university and the insurance company.

In his order Wednesday, he said that PMA did have to pay some claims. Sandusky victims from any given year were to be paid from the same policy, not from any of the several policies held by the university over the years.

“With respect to any PMA policy year, the number of occurrences for the Sandusky-related claims is equal to the number of victims who were first abused that year,” Glazer wrote.

There is also another legal challenge on the table. Starting in 2005, there was a “single perpetrator provision,” which says that all of those abused during that year be treated as a single incident.

The document reads like the rider page for a car insurance policy, with terms and exclusions and maximums. The total recoverable amount for any year, it says, is $3 million.

There is also a section about cases like the Sandusky scandal in general. Glazer granted PMA’s motion regarding a sexual abuse or molestation exclusion policy, saying the university was not entitled to coverage for the related claims on seven separate policies between 1992 and 1999.

Glazer did agree with the university that an expected or intended injury exclusion did not bar coverage before 1998.

The $92.8 million, about $7 million more than the Catholic Diocese of Boston paid to 500 claimants as of 2012, refers only to the settlement amounts. It does not include the university’s incurred legal costs or other fees or costs, like the $60 million pot of money for child abuse established under state Senate Majority Leader Jake Corman’s lawsuit against the NCAA and Penn State.

The NCAA had originally established the $60 million as a fine under the sanctions imposed after the release of the Freeh report, the university’s commissioned investigation of the scandal. That report cost more than $8 million.

The university has also been fighting legal battles on other fronts since the scandal broke. Penn State is no longer a part of the Paterno estate’s suit against the NCAA, but was for some time and has still been drawn into requests for documentation and depositions. There have also been challenges from alumni-elected trustees seeking access to the source materials of the Freeh report.

Penn State officials have said repeatedly that no tuition or taxpayer money would go to fund the cost of the scandal. Former president Rodney Erickson said it would covered by insurance.

Meanwhile, Sandusky himself is pursuing his Post Conviction Relief Act petition, seeking a new trial. A hearing on that petition will be held in Bellefonte on May 20.

Lori Falce: 814-235-3910, @LoriFalce

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