Thursday, August 2, 2012

Covered or Not Covered...?

State Farm Insurance recently filed a lawsuit against former Penn State assistant football coach Jerry Sandusky. Sandusky, the convicted child molester, had asked the insurer to pay for the legal costs of his criminal defense.

State Farm said NO WAY! They argued that although homeowners’ insurance can offer coverage for claims arising from the insured’s negligent acts, it does not cover intentional ones. The lawsuit is still under litigation but it’s pretty clear that Sandusky doesn’t have a chance with State Farm. The outcome is a little murkier for Federal Insurance, the second insurer Sandusky asked to pay for his defense costs.

Federal had issued a directors-and-officers liability and employment practices liability policy to The Second Mile, a youth charity group founded by Sandusky. The challenge here will be defining exactly at what point, and in what situation, negligence become intention. Isn’t directors-and-officers liability insurance all about bad behavior, like sexual harassment? And isn’t all bad behavior intentional? Surely hairs will be split.

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