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Penn State sues insurer PMA in dispute over Sandusky case coverage

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BELLEFONTE, Pa.—Pennsylvania State University has filed a countersuit against its commercial general liability insurer of 60 years over its refusal to provide coverage in a case involving child sexual abuse allegations against former assistant football coach Gerald A. Sandusky.

Penn State's lawsuit, filed Wednesday, claims that Pennsylvania Manufacturers' Assn. Insurance Co. refused to honor obligations owed to the university under CGL policies in connection with a November lawsuit filed against Penn State claiming negligence related to Mr. Sandusky's alleged sexual misconduct, according to court documents filed in a state court in Centre County, Pa.

PMA on Jan. 31 filed for declaratory judgment that Penn State is not entitled to coverage and defense under certain policies issued by the Blue Bell, Pa.-based insurer, according to court documents.

In its suit, PMA said only the policy in effect for the period during which the alleged abuse by Mr. Sandusky first occurred in 1992 is triggered by the November lawsuit. Under that policy, Penn State may not be covered due various exclusions including “abuse and molestation,” “intentional acts” and “known loss,” PMA said in the lawsuit filed in state court in Philadelphia.

However, in its countersuit, Penn State said that because the alleged molestation was ongoing, PMA owes defense and indemnification under each of the CGL policies that Penn State has maintained with the insurer without interruption from the 1950s through the present.

“Despite that duty and (Penn State's) rights, PMA has improperly narrowly interpreted its policies and the law and claimed that it need only provide any coverage, if at all, under the policy in effect at the time that the alleged injury first commenced,” the university said in the countersuit.

PMA's policies are standard form CGL policies drafted by the Insurance Services Office Inc. Each policy period has an aggregate limit of $3 million and per-occurrence limit of $2 million, according to court documents.

“Despite substantial insurance premiums paid by the University to PMA over decades, PMA has refused to provide the coverage for which the University is entitled," said David Gray, Penn State's senior vp for finance and business, in a statement. “We are extremely disappointed that rather than act in good faith with its insured, PMA instead chose to file an anticipatory lawsuit against us.”

PMA declined to provide comment for this story.

Penn State also this week said it has paid nearly $3.2 million in legal fees and to consulting and public relations firms as it addresses the child sexual abuse allegations. The university said some of those fees will be reimbursed by its insurance policies and will not be funded by student tuition, donations or taxpayer funds.

“We believe that PMA's lawsuit is without merit, and we are defending our rights under our insurance policies,” Mr. Gray said in the statement.

Penn State said that at present it is unable to determine the precise amount of total monetary damages, but that the sum exceeds $50,000, according to court documents.