Penn State Scandal: Sanctions, Reputational Loss & Civil Suits


Penn State Scandal: Sanctions, Reputational Loss & Civil Suits

First came the scandal that rocked the country after learning that former assistant football coach Jerry Sandusky of Penn State University was accused and later found guilty of 45 counts of child sex abuse. To make matters even worse, there were high-level individuals at Penn State that were aware of the allegations but seemingly did not take action and, more astonishingly, are being accused of taking steps to cover up what was going on.

Then last month the NCAA hit Penn State with a $60-million sanction and a vacation of all wins dating back to 1998. The university is also required to reduce 10 initial and 20 scholarships each year for a four-year period. The $60-million sanction, according to the NCAA, was equivalent to the average annual revenue of the football program. Penn State is ordered to pay the penalty funds into an endowment for “external programs preventing child sexual abuse or assisting victims and may not be used to fund such programs at the university.”

The Big Ten Council, which oversees the Big Ten college football conference, also censured Penn State with a $13 million fine.

On the heels of these sanctions, State Farm announced that it has pulled its sponsorship out of Penn State football. The insurer will no longer advertise at Beaver Stadium or during television and radio broadcasts of the Nittany Lions’ home games. “It’s not an image issue … we’re just doing what’s right,” said State Farm spokeswoman Arlene Lester. “We don’t want to be a supporter of something that’s not right in a community.”

The combined $73 million in fines and penalties will likely not be covered by Penn States’ insurance coverage. What’s more, the university faces complex civil lawsuits after Sandusky’s conviction. Some estimates have the university’s exposure at $100 million or more, especially in light of investigative counsel Louis Freeh’s report detailing Sandusky’s predations and administrators’ efforts to hide them. This estimated amount doesn’t include Penn State’s legal defense cost or what it has done to its reputation.

Responsibility to Act

As we discussed in prior articles, educators and individuals at all schools have the responsibility to act when faced with actions that endanger its students. What happened with Penn State is a wake-up call to every school throughout the country to ensure that proper risk management policies and communication protocols are in place. In the words of NCAA’s Mark Emmert, “These events should serve as a call to every single school and athletics department to take an honest look at its campus environment and eradicate the ‘sports are king’ mindset that can so dramatically cloud the judgment of educators.”

An education insurance program from Caitlin-Morgan MGU can protect your client’s entity and organization. We provide coverage to many types of educational facilities including higher education facilities such as universities, public schools, private & charter schools and special needs.