The Cost of Doing Business

The lawsuits are coming.

Penn State University will almost certainly face multiple court actions from Jerry Sandusky’s victims.  And the university may very well lose most of those cases.  That’s the legal vulnerability an institution faces when its highest ranking officials spend years covering up a child rape rampage by one of its employees on their premises

So . . . Penn State is going to do what any institution in its position would do, and seek to settle out of court as soon as possible.

There are multiple reasons for them to settle.  First, it makes sense financially.  The legal fees for court case after court case, not to mention the wrath of vengeful juries finding for the plaintiffs, could all lead to astronomical costs.  Settling might save them uncounted millions.

Penn State does carry general liability insurance to cover such cataclysmic costs.  However, the insurance company is denying that it is responsible.  Pennsylvania Manufacturers’ Association Insurance (PMA), which has insured Penn State for decades, claims it’s off the hook on this one, and has gone to court to wriggle out of it.  It cites two factors.

First, PMA claims that the university’s general liability policy has not covered ”abuse or molestation” since 1992.  And furthermore, it says, non-coverage of abuse or molestation isn’t just a Penn State issue; it’s a matter of public policy for the state of Pennsylvania.

The second reason PMA cites to avoid covering Penn State is that the school failed to disclose information that “was material to the insurable risk assumed by PMA.”

In other words, an insurance company determines your premiums based on the actual risks posed.  That’s how insurance works.

So for example, how much you pay in car insurance is determined in part by what the company thinks the odds are of your car getting wrecked.  Which is why they ask you all those questions and why you have to be honest when you answer.  If you lie about things like your age, where you live, the value of your car, or prior accidents, they can void the coverage.

Likewise, when an insurance company is deciding how much  to charge a school for premiums to cover against an serial child rapist employee running amok, the university would need to be honest about the fact that one of its employees is in fact a serial child rapist who has been running amok.  Instead, however, Penn State’s highest officials lied and covered up the entire affair.

Understandably, the insurance company feels that they shouldn’t have assume the risk on this one.  So they’ve taken Penn State to court.  We’ll see.

If the insurance coverage is void and Penn State is liable for court settlement payouts, then the school could be on the hook for hundreds of millions of dollars.  Thus, settling out of court ASAP would be of paramount concern.

But beyond the money, there’s another reason that Penn State wants to settle, and do so as quickly as possible.  It’s about the PR.  It’s about the school’s public image.

Court cases will do two things.  First, they will take time.  And the longer they take, the longer Jerry Sandusky and Penn State will be in the headlines.  Secondly, there will be testimony.  More of those lurid details will surface.  There will be more about what Sandusky did to those children.  And there will be a lot more about how Penn State officials covered it up and allowed him to continue wreaking unholy horror on their campus.

If you’re interested in justice, you might be rooting for trials.  But if you run the university, you probably want to avoid that.  Everyone understands that you want to avoid that, and they even understand why.

This isn’t rocket science.  Everyone gets it.  Penn State is protecting both its bank accounts and its public image by settling out of court.  It’s in Penn State’s best interest to settle.

New Penn State President Rodney Erickson went on CBS Face the Nation and acknowledged this.  “We hope to be able to settle as many of these cases as quickly as possible,” he said.  But he wasn’t done.

Why does Penn State want to settle?  Is it because of the money?  Is it because of the PR?  No.  According to Erickson, apparently it’s because:

“We don’t want to, if at all possible, drag victims through another round of court cases and litigation.”

I am stunned.  The school’s president actually had the temerity to say that Penn State wants to settle out of court to protect Jerry Sandusky’s victims.  Not because of its own, very obvious self-interest.  But because it’s so fucking magnanimous.

Unbelievable.

By now invoking the welfare of child rape victims victims to justify Penn State’s calculated legal strategy, President Erickson is not only being grotesquely disingenuous to the point of dishonesty, but he’s also adding insult to injury for those victims.

His statement is reprehensible, it’s inexcusable, and I doubt it fools anyone except the hardcore apologists who care more about football than education, and whose loyalty to the school far supercedes any understanding of what a school is actually supposed to do.

Incidents like this offer little if any hope that the culture of Penn State is changing.  It seems obvious that instead of running a school like a school, the people in charge are still dedicated to running their school like a business.  And so long as they do, its culture will remain corrupted.