Liability insurers that cover college and universities are likely to rethink their underwriting in light of the highly publicized sexual abuse case against a former Penn State University assistant football coach, said Bill Waldorf, a broker who specializes in providing coverage for educational and religious institutions.
"This Penn State issue highlights the need for risk management awareness and having policies in place to ensure a safe environment," said Waldorf, president of Waldorf & Associates, a Huntingdon, N.Y.-based broker that specializes in insuring colleges, universities and religious institutions.
Former Penn State University Assistant Coach Gerald Sandusky was convicted in June on 45 criminal counts that he sexually abused 10 boys during a 15-year period. Former FBI director Louis Freeh, who was asked to investigate Penn State's handling of the case, issued a scathing report this week that accused Penn State officials of trying to cover up the child abuse allegations and showing a lack of concern for the victims.
The case is raising important issues for risk managers and insurers, Waldorf said.
"It's probably fair to say that the perception in the general public is that the exposures of higher education clients would be limited to young adults, but nothing could be further from the truth. The risk exposure of the higher education world is far reaching," he said.
Children are often found on college campuses in day care centers, in athletic programs, in arts education, Waldorf said. While children are often not the main focus of colleges and universities, their safety is an issue that needs to be addressed, he said.
"We'll see a lot of policies starting to be imposed. There's more screening and selection of people who are in contact with the at-risk population.
There'll be more training programs, monitoring programs, and maybe even a need for third-party assessments," Waldorf said.
The insurance industry is also responding, he said.
"Insurance carriers have to have a different discipline going forward. Underwriters will initiate further data requirements, to find out what other programs a college may offer. Higher education is not limited to nine months, they have camps and other facilities that might have minors. It has to be a real focus," Waldorf said.
Insurers may change their forms or deductibles, but Waldorf said he didn't expect premium rates to suddenly rise.
"I don't think there will be a retreat of the industry in a knee-jerk reaction. But because of the high-profile nature of this case, there will be more questions, more due diligence, more discipline with respect to the exposure to try to get a better understanding of what is the risk," Waldorf said.
Product lines including general liability and directors & officers insurance may be impacted, he said.
Coverage for sexual abuse and molestation claims may be carved out of standard policies, Waldorf said, but could be made available on a special form.
In the end, the increased focus on protecting children in higher education settings "is going to be good for the industry. It will improve the quality of risk management, and bring more awareness that this is a real exposure," Waldorf said.
Litigation between Penn State and its insurers has already begun.
In June, a federal judge in Pennsylvania rejected Federal Insurance Co.'s argument that it is not obligated to cover the legal defense costs stemming from the sexual abuse criminal charges against Sandusky, determining Federal Insurance's request was premature.
In May, Penn State filed a countersuit against the writer of its commercial general liability policy, alleging Pennsylvania Manufacturers' Association Insurance Co. has refused to cover legal costs that it is required to pay under the policy.