The fine print. Easy to skim through, if not skip altogether, but only at your own risk.
We all know that, right? The University of Southern California was reminded of it in a big way after the campus gynecologist, Dr. George Tyndall, was accused of sexual misconduct involving hundreds of patients during his decades-long tenure. Tyndall has denied the allegations.
While the criminal courts deal with that question, the university’s insurance company turned to the civil courts to file a lawsuit claiming it shouldn’t have to cover the school’s $215 million sex-abuse settlement because the policy it issued to USC includes an abuse or molestation exclusion.
Ah, exclusions. Every policy has them. In fact, they’re so much part of any insurance purchase, it’s really unfair to think of them as the “fine print.”
An exclusion, as a refresher, eliminates coverage in the insuring agreement for certain types of risk. Insurers, in other words, use exclusions for risks they don’t want to insure.
An obvious place to look for policy exclusions is in the section titled, “Exclusions.” Some policies contain both exclusions and sublimits. Sublimits on property policies, for example, often restrict coverage for valuable items like furs and jewelry to a specified (low) limit.
Another place to look is in the definitions section of your policy, because how a particular term is defined can inherently contain exclusions, particularly with Management Liability and Errors & Omissions policies.
In any case, while it’s unclear just what happened in the USC case, it’s fair to say everyone’s upset.
The insurer alleges that as USC’s 2017-18 policy was expiring in May 2018, the school learned that the Los Angeles Times planned to run a story accusing the university of allowing Tyndall to continue practicing as a gynecologist despite repeated misconduct accusations against him.
“Recognizing that lawsuits were sure to be filed in the wake of this story, USC’s insurance broker … suddenly contacted (the insurer) and demanded on behalf of USC – without revealing the impending allegations about Dr. Tyndall – that (the insurer) amend its policy to delete the Abuse or Molestation Exclusion,” the lawsuit states.
The lawsuit notes that the insurer never agreed to provide coverage for abuse or molestation claims, and that USC accepted its coverage on that basis.
What a mess, right? But, wait, it gets worse.
The suit also alleges that when USC applied for the policy, the university failed to disclose that it had forced Tyndall to resign after a 2017 USC investigation found he had violated the school’s policies on harassment.
“Despite USC’s knowledge of complaints made against Dr. Tyndall by nurses, medical assistants, and patients, USC kept (the insurer) in the dark,” the lawsuit states. “Had (the insurer) known of these material, serious allegations and the underwriting risks they presented, at a minimum, (it) would not have offered to provide insurance to USC on the same terms, and would have expressly excluded coverage for claims arising out of Dr. Tyndall’s alleged conduct.”
So now we have a case that underscores the importance of understanding your exclusions, as well as why it’s critical to be fully upfront with any insurer issuing you a policy. After all, insurers can’t be expected to pay out on claims covered by policies they issued based on incomplete or even fraudulent information.
Meanwhile, a federal judge is expected to soon give final approval to the $215-million class-action sex-abuse settlement. Barring any appeals, that approval would clear the way for USC to start writing checks to approximately 18,000 women who saw Tyndall during their time at the university.
Jeff Parent is an Insurance Advisor at CCIG. Reach him at Jeff.Parent@thinkccig.com or at 720-330-7918.
CCIG is a Denver-area insurance, employee benefits and surety brokerage with clients nationwide. We do more than make sure you have the right policy. We help you manage your long-term cost of insurance with our risk and claims management expertise and a commitment to service excellence.