Filed Under:Markets, Litigation

Penn State’s Exposure to Civil Litigation Not Blocked by Immunities

NU Online News Service, Nov. 17, 11:50 a.m. EST

Pennsylvania State University—because it is included among a select group of schools that are neither public nor private—is still open to civil ligation.

However, that does not mean roadblocks to civil suit don’t remain.

Questions of the university’s exposure to civil litigation have risen from allegations surrounding former Penn State assistant football coach Jerry Sandusky, who has been charged with 40 counts of sexual abuse of boys over a 15-year span.

As prosecutors develop a criminal case against Sandusky and two university officials charged with perjury, civil litigation possibilities are mulled. A civil case would be filed at the conclusion of the criminal case.

Attorneys, in blogs and as sources in news stories, have weighed in. Most agree that the university will face civil lawsuits.

When asked to comment about the scandal and its implications in general, United Educators said via email that it could not provide any commentary because “Penn State is an owner/member of United Educators.”

As a reciprocal insurance company, United Educators refers to its policyholders as owners and members.

Repeated emails and calls to Penn State were not returned.

Also Read: Penn State Sex Abuse Scandal: From the Start, a Risk Management Nightmare

Penn State is not a member of the Pennsylvania State System of Higher Education (PASSHE), a group of 14 state-owned schools, according to a spokesman of the public university system.

Membership here may have provided a measure of immunity under the Sovereign Immunity Act, which as a general rule, says a state entity is immune from suit.

“Penn State is not a government entity so it looks as though they wouldn’t have protection,” said Joseph J. Santarone Jr. of law firm Marshall, Dennehey, Warner, Coleman & Goggin of Philadelphia.

Santarone, who has been a part of litigation with PASSHE schools, says caps exist to mitigate damages.

Penn State, however, along with the University of Pittsburgh, Temple University and Lincoln University, is what is known as a “state-related” school, says Kenn Marshall, spokesman for PASSHE.

“I’m not sure any other state has this kind of group of schools in the middle [of state and private universities],” he says.

This doesn’t mean the quartet does not receive state funding. According to reports, the schools received $560 million in state funds—about $272 million going to Penn State.

The distinction as a non-public institution also allows Penn State to avoid adhering to freedom-of-information laws, says Marshall.

Ben Andreozzi of Andreozzi & Assoc. in Harrisburg, Pa. is reportedly representing one of the alleged victims of Sandusky.

Andreozzi could not immediately be reached for comment but his firm’s website provides some insight.

The cause of action is based in federal law, not state law, and although Penn State may be afforded some immunity it can still be sued by sexual-assault victims, the site says.

“The sexual-assault victim typically must establish that the public school or university affirmatively created a danger for the victim,” Andreozzi’s website says. “When an official at a public school or university knows of a risk of harm to a victim and is deliberately indifferent to that risk, that official may be liable in their official capacity with that school or university.”  

Santarone says the school’s insurer is likely leafing through policy exclusions, including a sexual misconduct exclusion he says is included in many policies. Suits filed on the grounds of negligent supervision, for instance, would likely be covered but to what extent is at question.

“An insurer may be bound to defend, but that doesn’t necessarily mean it has to indemnify,” Santarone says.

A Penn State spokesman tells The Patriot-News the university’s insurance will pay for the defense of Tim Curley, athletic director, and Gary Schultz, vice president for finance and business. Both are charged with perjury. The school says Curley has taken an administrative leave and Schultz will retire.

Moody’s Investor Services is also interested in learning more about Penn State’s exposure to civil litigation, placing the university’s “Aa1” bond rating on review to assess reputational and financial risks from the scandal, including “possible emerging risks emanating from potential lawsuits/settlements, weaker student demand, declines in philanthropic support, changes in state relationship and significant management or governance changes.”

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