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Penn State Sues Insurer Over Sandusky-Related Claims

March 6 (Bloomberg) -- Pennsylvania State University sued Pennsylvania Manufacturers’ Association Insurance Co. for denying coverage of claims and litigation arising from the Jerry Sandusky child sex-abuse scandal.

The insurer refused to cover claims by 30 men alleging improper conduct or abuse at the hands of Sandusky, a former assistant football coach at the university, the school said in a complaint filed yesterday in state court in Bellefonte, Pennsylvania. PMA’s refusal to honor its policy obligations is “frivolous and unfounded,” the school said.

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

Penn State faces at least six lawsuits over Sandusky’s abuse. Sandusky, 69, a former defensive coach, was found guilty in June by a jury of abusing 10 boys over a 15-year period and convicted on 45 counts. He was sentenced to at least 30 years in prison. The university said it plans to compensate victims with money from insurance policies and funds set aside from interest on internal loans.

Awaiting Response

Kenneth Feinberg, an attorney with Feinberg Rozen LLP hired to help facilitate negotiations, said last month that mediators were awaiting a response from the school on settlement offers that had been delivered for some claimants.

The university’s insurance policies will cover the defense of claims against the school, La Torre said in the statement. He declined to comment on the status of settlement negotiations.

“Student tuition, taxpayer funds or donations will not be used,” La Torre said in the e-mail.

Diane Nafranowicz, a spokeswoman for Blue Bell, Pennsylvania-based PMA, declined to comment on the complaint.

Penn State has maintained insurance policies with PMA since the 1950s, according to the complaint. Each of the policies contains a $2 million-per-occurrence limit and a $3 million aggregate limit, except for one that sets a $2.5 million limit for both and another that sets a $2 million limit, according to the complaint.

The case is Pennsylvania State University v. Pennsylvania Manufacturers’ Association Insurance Co., 2013-0819, Court of Common Pleas of Centre County, Pennsylvania (Bellefonte).

To contact the reporter on this story: Sophia Pearson in Philadelphia at spearson3@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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