Settlement insurance
March 26, 2021 10:12 AM   Subscribe

Do universities paying large legal settlements, such as USC’s recent $852MM settlement for Tyndall, pay out of pocket from operations or their endowment, or do they have an insurance policy pay? Apologies if this is obvious; had no luck searching.
posted by michaelh to Law & Government (7 answers total) 2 users marked this as a favorite
Best answer: USC has announced they are paying their $1.1 billion settlement (combined) with a combination of insurance, emergency funds, and of course budget cuts. They didn’t say they’d touch the endowment. Most endowed schools treat the endowment like the nuclear codes. You almost can’t touch it even when it seems the obvious solution, as it has to many of us during the pandemic. Endowments are a messed up thing, basically hoarded intergenerational wealth.
posted by spitbull at 10:21 AM on March 26, 2021 [2 favorites]

Best answer: I do not know in USC's case, but in many cases, it is the insurance company if the issue is deemed to fall under the policy. First, the insurance company will fight the school to say it is not covered because the school did x, y and z. Once it is determined that insurance is in force, often the entire settlement is on the insurance company. Often it is the insurance company that decides to settle, not the school. In a local public k-12 school, I know for a fact that the school wanted to settle a case and the insurance company wanted to go to court. The insurance company had its way.

I suspect there is a difference between public universities/colleges/schools and private ones. I know that in the case of many public schools, they have a reserve set up for legal settlements. They may self insurance below a certain number, say $1 million. So a slip and fall settlement for $50,000 would be paid out of operations.

A school's endowment is a separate entity from the school itself in a lot of cases. It is set up this way in order to protect it from just these sort of legal payouts.
posted by AugustWest at 10:24 AM on March 26, 2021 [4 favorites]

Best answer: Somewhat lateral, but I know in Vermont when K-12 schools lose big lawsuits, they pay out of insurance most of the time. I have a friend who is often a lawyer who sometimes is in these trials and not only is there (usually, as AugustWest says above) but it's not allowed to be brought up in the lawsuits themselves, so the people think they are suing the tiny town, and not a giant insurance corporation.
posted by jessamyn at 10:50 AM on March 26, 2021

Best answer: Yes, what AugustWest said. Depending on the situation (who committed the misconduct, who it was committed against, whether the victim sued the individual or the company), it will be covered under directors & officers insurance or employment practices liability insurance. Since the insurance company is on the hook for the payout (and may be required to provide and pay for the lawyers), they commonly retain a right to approve or veto proposed settlements.
posted by praemunire at 11:20 AM on March 26, 2021

Response by poster: Thanks, all!
posted by michaelh at 11:59 AM on March 26, 2021

Keep in mind that most endowments are made up of funds with heavy restrictions placed there by donors. These are often legal agreements and when/if you want to change them, you have to get the state attorney general involved. Barring extreme circumstances, institutions don't mess with the restricted funds in their endowments.
posted by all about eevee at 1:13 PM on March 26, 2021 [4 favorites]

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