## Facts

- Federal Insurance Company issued a “Forefront Portfolio for Not-for-Profit Organizations” policy to The Second Mile, a Pennsylvania nonprofit, providing certain management liability coverages, including defense-cost coverage for civil and criminal actions alleging covered “wrongful acts.”
- Gerald A. Sandusky, a founder and officer of The Second Mile, qualified as an “Insured Person” under the policy.
- After a grand jury investigation, Sandusky was criminally charged with numerous counts involving alleged sexual offenses against minors; additional counts were later added.
- Civil suits were also filed alleging Sandusky sexually abused and molested minor boys.
- Sandusky sought coverage for (1) defense costs in the criminal and civil matters and (2) indemnification for any civil damages.
- Federal advanced $125,000 in defense costs under a reservation of rights and then filed a federal declaratory judgment action seeking a ruling that it had no duty to defend or indemnify Sandusky.
- Federal moved for judgment on the pleadings under Rule 12(c), arguing that any policy interpretation requiring indemnification for damages arising from child sexual abuse would be unenforceable under Pennsylvania public policy.

## Issues

1. Whether Pennsylvania public policy bars enforcement of an insurance policy to indemnify an insured for civil damages arising from the sexual abuse and molestation of minors.
2. Whether, given a public-policy bar to indemnification for such conduct, the insurer has any obligation to provide or continue providing a defense (defense costs) for related criminal and civil proceedings.

## Decision

- The court granted Federal’s motion for judgment on the pleadings.
- The court declared that Pennsylvania public policy prohibits enforcing insurance contracts to indemnify an insured for damages arising from sexual abuse or molestation of children.
- The court entered declaratory judgment that Federal had no obligation to provide insurance coverage to Sandusky under the policy for the underlying criminal and civil matters, including no obligation to fund a defense.

## Legal Principles

- Pennsylvania courts will refuse to enforce contractual provisions that violate clearly defined public policy derived from laws and legal precedents.
- Public policy in Pennsylvania bars insurance indemnification for liability arising from intentional, reprehensible conduct, including child sexual abuse and molestation.
- Contract language cannot require coverage that would contravene public policy; a policy may be declared unenforceable to the extent it would insure against the consequences of intentional child sexual abuse.
- Where the only alleged conduct falls within a public-policy prohibition against coverage, a court may declare no duty to indemnify and, in practical effect, no duty to defend for those claims.

## Conclusion

The court held that Pennsylvania public policy forbids enforcing an insurance policy to cover losses stemming from alleged child sexual abuse, and it therefore declared that the insurer owed no duty to indemnify Sandusky for civil liability and no duty to provide defense-cost coverage for the related criminal and civil proceedings.


Federal Ins. Co. v. Sandusky, No. 4:11-CV-02375, 2012 WL 1988971 (M.D. Pa. June 4, 2012)