The insurance company that provides Penn State University with its general liability coverage says they won't be paying out any claims that might arise from Jerry Sandusky's criminal child abuse. According to The Associated Press, Pennsylvania Manufacturers' Association Insurance filed a memo with a state court this week saying that it should have been notified about the investigations that were made into Sandusky's conduct as far back as 1998, because that was material information about the risks they were unwittingly taking. Failure to do so makes them no longer liable.
Even if school officials hadn't withheld the news, the company says the "abuse or molestation" claims wouldn't be covered anyway. They say the policy explicitly excludes those and state rules would back them up. Not only was Sandusky a university employee at the time of abuse, many of the incidents actually took place on Penn State property.
The school has already been fined about $73 million by the NCAA and the Big Ten Conference, and lawsuits from Sandusky's victims haven't even begun yet. There could also be state and federal fines for violations of the Cleary Act (which requires educators to report claims of child abuse), plus court costs and penalties and all other manner of ways for the school to lose more money thanks to Sandusky. If the insurance company is able to deny any payouts, then the school will presumably find some other way to pay their debts — most likely by dipping into its $1.83 billion endowment, which will probably be replenished quickly by donors.
And if the whole thing makes Penn State decide they need a new insurance company, it won't be State Farm. That insurer said yesterday that it is pulling its ads from Nittany Lion home games this fall and is "reviewing its connection" to the school.