Directors and Officers Liability for Penn State

Directors and Officers Liability for Penn State

Fallout from the recent scandal at Penn State displays why educators and board members need to have coverage when a lawsuit is filed due to misconduct against a teacher or administrator. Directors and Officers Liability for Educator is a policy that is used by universities, colleges and other institutions of higher learning to protect the school and its officials.

Penn State, under the microscope since former assistant football coach Jerry Sandusky was charged and convicted with 52 counts of child sex abuse, received a subpoena in February of 2012 from the U.S. attorney’s office in Pennsylvania. At the time, the university released the following statement about the payment of legal fees for employees: “The university is suggesting those individuals who received subpoenas retain their own counsel and the university will agree to reimburse them for their legal expenses, as they were acting within the scope of their employment and in the interest of the university…Expenses of such counsel may be paid by the university’s D&O insurance carrier.” However, it wasn’t that simple.

Which insurer is responsible for Penn State defense?

Penn State and its primary general liability insurer, Pennsylvania Manufacturer’s Associations Insurance Co. (PMA), have filed lawsuits against each other over the legal expenses incurred. Penn State said its policy with PMA entitles the school to a legal defense of a civil lawsuit filed against the university regarding the allegations against Sandusky. PMA, however, says it has no duty to defend the university as the case does not fall under general liability.

Having the proper coverage is of utmost importance

The issue between the two parties brought to light the fact that PMA, which issued a general liability policy to the school, would not come to their defense, since the allegations were a D&O policy matter and they were not providing that type of coverage. In fact, in most cases D&O wrongdoings are excluded under a general liability policy. This underscores the importance of having coverage for different exposures and risks and understanding what you are purchasing. A D&O policy is a specific coverage that protects teachers, administrators, volunteers, board members and other staff from liability claims that can arise during the educational process.

All educators can learn a valuable lesson from the debacle currently facing Penn State. Having Directors and Officers for Educators insurance coverage is vital to the existence of learning institutions everywhere.

Leave a Reply

Your email address will not be published. Required fields are marked *

three + four =