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Potential Rising Insurance Rates for Colleges in Wake of Sexual-Abuse Scandal

Blogs, Insurance Coverage

As the outcomes of the Penn State and Syracuse University internal investigations unfold, colleges may see an increase of costs associated with carrying liability insurance.  Former FBI director Louis Freeh’s internal investigation of Penn State released on July 12, 2012, revealed key figures in the Penn State community repeatedly concealed critical facts relating to former assistant football coach, Jerry Sandusky’s sexual abuse.  In addition to concealing facts, the investigation found the University poorly enforced its own policies relating to the protection of children and employee misconduct.  

Similarly, an internal investigation of Syracuse University’s response to sexual assault allegations against former assistant basketball coach, Bernie Fine, revealed the university’s response to the allegations were imperfect and the university fell short in key areas.  The investigating body recommended the university change policies regarding involvement of minors in university activities, the reporting of alleged serious criminal conduct, modify record keeping practices of allegations of wrongdoings by staff, and train faculty and employees on sexual assault reporting.    

In light of both scandals, colleges have reexamined their own policies and some industry professionals such as John McLaughlin, managing director of Arthur J. Gallagher Risk Management Services, Inc., predict more institutions will be purchasing higher limits of liability.  In an interview with USA Today, McLaughlin states insurers will “work hard to define the extent of their exposure” and will want to “understand exactly what types of policies and procedures are in place.”  

In the same interview, Janice Abraham, president and CEO of United Educators Insurance, a specialty provider of coverage to educational organizations, stated she sees schools “making more of an investment in risk management” and she noted her insurance group does not anticipate any changes in liability insurance limits.  Although it remains unknown if insurance rates for universities will increase, in the wake of the Penn State scandal insurers are more aware of the risks facing colleges and colleges are working harder to enforce existing policies in an effort to minimize high risk areas.  

The internal investigation reports provide other colleges with the opportunity to evaluate their own policies in light of the failed policies at Penn State and Syracuse.  Moreover, colleges can learn from the failures of Penn State and Syracuse and prioritize certain areas of risk management such as managing youth on campus and sexual-abuse education.