Possibly the Best Reason To Insure Your Charity

By Gary Snyder

  

As the subscribers of Nonprofit Imperative have read, Jerry Sandusky, the former Pennsylvania State University assistant football coach is accused of sexually abusing boys. Sandusky was charged in November with 52 criminal counts related to the alleged abuse of 10 boys he met through the Second Mile, a charity he founded for needy children.

Federal Insurance Co. issued an insurance policy to Second Mile, covering the charity and all of its directors and officers, which included a section stating that the company would indemnify any "'loss' which an insured person becomes obligated to pay for a wrongful act committed, attempted, or allegedly committed by an insured person. The policy was issued on March 2011 for the period April 1, 2011 to April 1, 2012. In December the insurer advanced $125,000 to Sandusky’s defense attorney. Federal sued that month seeking a court order saying it isn’t required to provide the coverage.

Pennsylvania public policy bars enforcement of insurance contracts that indemnify the insured against damages arising from “certain reprehensible conduct,” said U.S. District Judge Yvette Kane in Harrisburg, Pennsylvania. It’s unclear whether the policy makes Federal’s duty to provide Sandusky with a defense unenforceable, Kane said in court papers.

Without the factual background that would come with discovery, Kane declined to answer a question that would have such broad implications: whether or not the insurance company was obligated to cover Sandusky's defense costs.

The Second Mile announced last month that it planned to transfer its assets and programs to a similar nonprofit, called Arrow, because after the allegations against Sandusky, "there would not be adequate support, including financial, from donors, volunteers and referring social service agencies to continue The Second Mile as its own entity." (link)

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, , Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more • Nonprofits: On the Brink (iUniverse, 2006)