Coverage Found For Subpoena Response in Sex Abuse Case (NY)

In the last decade, sexual abuse scandals have rocked many religious and educational institutions. Several revered public figures have fallen with a thud from the lofty pedestals upon which they were perched. Beyond the moral failings and public relation disasters, more mundane questions arise such as who pays for the expensive investigations that arise after those claims become public?

Syracuse University found itself embroiled in such an alleged scandal in the fall of 2011. Two young men claimed that they were sexually abused by Associate Men’s Basketball Coach Bernie Fine during the course of his employment with the University. Complying with its contractual obligations, the University  gave written notice to its insurer, National Union, of a media report publicizing those claims. After numerous subpoenas were issued to the University in connection with state and federal investigations, the University provided copies of the subpoenas to National Union which denied any obligation to pay the costs of responding to those subpoenas. According to its motion papers, the University “expended millions of dollars in legal defense fees and costs to investigate and respond to the Subpoenas.”

Under the “Not-For-Profit Protector” policy issued by National Union on a “claims made” basis, the insurer agreed to “pay on behalf of [Syracuse University] loss arising from a claim first made against [Syracuse University] during the policy period…for any actual or alleged wrongful act of [Syracuse University]. The term “claim” included: (1) a written demand for monetary, non-monetary or injunctive relief; or (2) a civil, criminal, administrative, regulatory or arbitration proceeding for monetary or non-monetary relief which is commenced by: … (ii) return of an indictment, information or similar document (in the case of criminal proceeding)…”

The key issue was whether the grand jury’s investigations and subpoenas constituted a “written demand for… non-monetary relief” or a criminal proceeding for non-monetary relief commenced by the “return of an indictment, information or similar document (in the case of criminal proceeding).”

Ruling in favor of Syracuse University, the court held that the subpoenas’ demand for the production of documents and testimony qualified as a written demand for “non-monetary” relief. Further, the grand jury’s investigations also qualified as a “criminal proceeding” for non-monetary relief, triggering the insurer’s duty to defend Syracuse University.

The continuing saga involving Syracuse University and its Associate Coach Bernie Fine may be near a close but we suspect that the insurance coverage dispute is far from over. Stay tuned for updates on any appellate activity.

If you have any questions or comments about this post, please email Paul at pclark@wcmlaw.com