By
Ray Blehar
There is a lot of confusion over the latest Penn State University Board of Trustees (PSU BOT) insurance debacle and misdirected anger at PSU's insurer (the Pennsylvania Manufacturer's Insurance Company) about the release of uncorroborated claimant information.
Make no mistake, the people at fault for this debacle are former PSU President Rodney Erickson and the PSU BOT's Legal and Compliance Committee. However, the settlement scheme was just one cog in the wheel of an orchestrated effort to convict PSU in the court of public opinion.
The timeline, as usual, tells the story.
Rolling Out the Red Carpet For Lawsuits
After (then) PSU President Graham Spanier attempted to defend the University from the baseless allegations of a failure to report Sandusky, he was removed and the BOT began a series of actions to convince the public of the culpability of PSU officials in the Sandusky matter.
Nov. 4, 2011: Sandusky charges were announced.
Nov. 9, 2011: The PSU BOT announced removal of Spanier and Paterno, leading public to believe PSU officials were guilty of a cover-up. No vote was held prior to announcement of their removals.
Nov 11, 2011: Then interim (puppet) President Rodney Erickson's 5-Point Promise impled that PSU had a culture that failed to do the right thing and he committed to providing support to the victims.
Awareness of "Hole" of Coverage
Upon receiving the first lawsuit, PSU learns that the policies in effect during the time period when most of the (then) alleged abuse occurred do not cover "abuse and molestation"
Nov. 30th, 2011, John Doe A filed a civil lawsuit against The Second Mile and Penn State for his alleged abuse suffered from 1992 through 1996.
Jan. 6, 2012: PSU filed a claim with PMA for coverage under its comprehensive and commercial general liability (CGL) policy.
Jan 30, 2012: PMA issued a reservation of rights letter denying coverage under the CGL policy because of its "abuse and molestation" exclusion in effect after 1992. In addition, PSU policies have "intentional acts" exclusions and prohibit punitive damages.
Attempt to Side-step "Hole" In Coverage
PSU will file bodily injury claims to circumvent abuse and molestation exclusion.
Jan 31, 2012: The President Rodney Erickson's personal notes, dated January 30, indicated a plan to submit abuse claims as bodily injuries and utilize Hershey Medical Center to record medical expenses against the claims.
Feb 15. 2012: PSU filed a lawsuit against PMA seeking payment of the (bodily injury) claims for John Doe A.
Freeh Report, NCAA, and Lawsuits
With the understanding that intentional acts are not covered under its insurance policy, a small group of trustees embrace the allegations in the Freeh Report that place blame on PSU officials. In the following ten days, this group negotiates a set of sanctions and harsh financial penalties from the NCAA. This action is a continuation of the small group's goal of convincing the public of the culpability of Paterno, Spanier, and others for not preventing Sandusky's abuse.
July 12, 2012: The Freeh Report was issued claiming PSU officials were aware of Sandusky's sexual abuse of children and concealed the abuse.
July 12, 2012: PSU officials Karen Peetz, Rodney Erickson, and Kenneth Frazier publicly praised the Freeh Report as comprehensive and thorough, admonish Paterno, Curley, Schultz, and Spanier for their failure to protect children, and pledged to reform PSU by following the report's recommendations.
July 23, 2012: The President Erickson signed a Consent Decree with the NCAA and agreed to pay $60 million in fines for sexual abuse prevention and victim programs. The Consent Decree's language quotes from the Freeh Report. Action was approved by PSU BOT Executive Committee.
July/Aug 2012: Sandusky victims from trial and elsewhere file lawsuits against PSU.
Some Settlements Approved
Despite knowing that it is not insured for abuse and molestation claims from 1992 to 2004, the University begins settlements with trial victims who were abused during that time frame. Erickson understands that some of these claims will not be covered and infers that they will be paid from internal loan interest (residing in the Institutional Support Budget). While Erickson stated that Penn State wanted a "just outcome for the victims," the underlying motive for the settlements was as a demonstration of the University's culpability for Sandusky's abuse.
Sep 19, 2012: In a Bloomberg interview, then President Erickson stated that settlement money would come from insurance and internal loan (interest).
Sep 20, 2012: PSU hired Feinberg Rozen to moderate and settle claims.
 |
| Lubert: Board Member at PSU & Second Mile |
July 12, 2013: Subcommittee on Legal and Compliance propose approval of claims. Committee members included: Ira Lubert (chair); Kenneth Frazier (vice chair), Keith Masser (ex officio), Kathleen Casey, Richard Dandrea, Keith Eckel, George Greig, and Adam Taliaferro. Approved by PSU BOT Executive Committee.
Oct 28, 2013: 26 of 31 claims settled for the amount of $59.7 million. 3 claims were denied (D.F. claim among them) and 3 claims agreed to in principal (Victim 6 and Victim 9). The settlement agreements contained a provision that the claimants cannot file additional lawsuits against The Second Mile.
More Lawsuits and "Freeh" Money
Unable to come to terms with Penn State, Victims 6 and 9 use discovery of the Freeh Source materials to extract additional money from the University.
Nov 22, 2013: After being unable to reach agreement, Victim 9 files a lawsuit relying heavily on information from the Freeh Report to prove negligence on the part of Penn State.
Mar 18, 2014: After being unable to reach an agreement, Victim 6's legal team is awarded discovery of some of the Freeh Source materials.
Sep 3, 2014: Victim D.F. sues PSU, also citing Freeh Report to prove negligence.
Dec. 5, 2014: Victim X sues PSU, claiming abuse in 1988, argues his case would have been within the statute of limitations if not for PSU's failure to report in 2001.
Jan 1, 2015: Victim 9 legal team awarded discovery of Freeh Source materials. PSU was required to turn over all materials d by May 29, 2015
Apr 12, 2015: By an 18-6 vote, the BOT approves a substantial and undisclosed settlement for Victim 9 (estimated at between $15 - $20 million) and for five other claimants. Total payment of approximately $33.2 million.
Judge Slams Door on Reimbursements
In an outcome that should have been a surprise to no one, Judge Glazer ruled that PSU's case for reimbursement for the claims from between 1992 and 2004 were essentially denied. In his ruling, he frequently referenced the Freeh Report to justify that PSU was negligent, especially noting the timeframe from 1998 to 2001. Moreover, PSU attempted to refute the Freeh Report findings that PSU officials knew about Sandusky's behavior, but the arguments were refused by the Judge due to - among other things -- the University's acceptance of fines and sanctions from the NCAA.
32 claims were paid by PSU for a grand total of $92.8 million.
What we know:
1. PSU is not entitled to reimbursement for the claims between 1992 and 2004, which include at least eight victims: Matt Sandusky, Victim #2, John Doe A, Victim #3, Victim #4, Victim #5, Victim #7, and Victim #10. Estimated Loss: $12 million.
2. PSU can receive $3 million aggregate limit for three claims paid from 2005 and 2006. This coverage would include the exorbitant ($20 million) claim paid to Victim 9, a payment to Victim 1, and one other payment. Estimated Loss: $21 million.
3. PSU can receive full coverage for three claims prior to 1992. The ruling notes claims from 1976, 1987, and 1988. Estimated Coverage: $6 million.
What we don't know:
How many of the eighteen remaining claims fell within the 1992 to 2004 time frame that is not covered and how many occurred prior to 1992 and are fully covered.
The Bottom Line
The Committee on Legal and Compliance knowingly made a decisions to pay out at least $32 million that they (and Erickson) knew would not be covered by insurance.
In news that surprised no one who closely followed this fiasco, the University went on record to admit that the Committee and Feinberg Rozen did not require evidence to support the allegations made in the claims. At this point, we now know what Eric Barron meant in his video stating that some people don't believe Paterno's statue should be returned because of what they know.
Who are they? Lubert, Frazier, Peetz, Dambly, Eckel, Casey, and Dandrea. And they are all trustees who stood by the Freeh Report and did everything possible to ensure that it never got reviewed.
It is highly probable that if the Judge hadn't released the uncorroborated information about reports to Paterno in his ruling, one or some of these trustees would have leaked the information to the press -- on or about the time the alumni-elected trustees were going to finally toss the Freeh Report on the ash heap of history.
The settlements by this cabal of trustees and their efforts to protect the false and harmful narrative that was put forth by the Attorney General, the Freeh Report, and the NCAA were all part of an ongoing effort to convict Paterno, Spanier, Curley, and Schultz in the court of public opinion.
The purposeful damage done to the University by their actions is immeasurable and should qualify as malfeasance.
Ray Blehar 
John 
