March 13, 2012; Source: Business Insurance Magazine

Federal Insurance Company, the insurer for The Second Mile, has refused to pay the legal expenses for Jerry Sandusky, the youth charity’s founder. Sandusky, the former Penn State assistant football coach, is continuing his vigorous defense against a 52-count criminal indictment alleging child sexual abuse involving boys he met through The Second Mile.

Federal claims that “providing coverage for these types of criminal and civil claims would be repugnant to Pennsylvania public policy,” according to documents filed last week in a Harrisburg, Pa. federal court. Sandusky’s lawyers counter that the insurance policy sold to The Second Mile does not mention exclusions or other provisions that would allow it to avoid paying legal expenses for Sandusky.

One issue appears to be whether Sandusky was acting in an insured capacity at the charity. Though he founded the charity and served on its board until 2010, it’s unclear whether he was ever officially listed, trained, or supervised as a Second Mile volunteer working with children. In order to avoid paying Sandusky’s legal expenses, the insurance company will likely have to prove that The Second Mile failed to enact or enforce policies relating to Sandusky’s contact with children served by the charity. Of course, the insurance company may also have to show that it exercised its own due diligence by reviewing the operating policies and procedures it was being paid to insure. –Michael Wyland