From recreational sports to cutting-edge science to big data management, a wide variety of activitiestake place in our institutions of higher learning outside the classroom. As a result, colleges and universities have an equally broad spectrum of liability exposure and can face some unique insurance coverage challenges. Often, the successful resolution of these challenges may hinge upon closing so-called "gaps" in coverage before claims arise.

A recent unpublished decision, stemming from a tragedy at Bellarmine University in Louisville, Kentucky, over 10 years ago highlights the potential consequences colleges and universities may face as a result of a gap in a liability insurance coverage programs discovered only after a claim has occurred. In Underwriters Safety and Claims, Inc. et al v. Travelers Property Casualty Company of America et al., No. 16-5143, the Sixth Circuit affirmed a lower court ruling that held that the University’s insurers were not required to defend or ultimately indemnify Bellarmine against litigation arising from the death of a student lacrosse player.

In August 2005, a student member of the University’s men’s lacrosse team collapsed and died of sudden heart failure while training with the rest of the team under the direction of the team coach. Prior to joining the team, the student had undergone a medical screening required by the University. Based on that medical screening, the physician had certified that the student did not suffer from any disqualifying medical condition that would prevent his participation in the University’s lacrosse program. The student’s estate brought a subsequent wrongful death suit against the University, alleging that the University failed to provide adequate preparticipation screening or to respond sufficiently when the student collapsed.

The University tendered the claim to its insurers, seeking both a defense and indemnity, under two liability insurance policies it had purchased to cover the policy period May 31, 2005 to May 31, 2006—one policy providing primary commercial general liability coverage issued by Travelers Property Casualty Company of America (Travelers) and one policy providing umbrella commercial general liability coverage issued by Cincinnati Insurance Company (CIC). While the Travelers Policy offered liability coverage for various enumerated bodily injuries in the base policy form, it also contained two endorsements that served to modify the available coverage. The first endorsement—the Xtend Endorsement—expanded the definition of bodily injury to include “incidental medical malpractice injury,” but not where such injury is otherwise excluded. The second endorsement—the Athletic Participants Exclusion Endorsement—notably excluded coverage for bodily injury “to any person engaged in athletic, exercise, or sports activities” sponsored by the University or conducted on the University’s premises. The CIC Policy likewise contained an exclusion for bodily injury “to any person . . . practicing for or participating in any contest or exhibition of an athletic or sports nature” whether or not it is organized or sponsored by the University. This and other exclusions did not apply under the CIC Policy, however, to the extent a claim was eligible for coverage under the primary Travelers Policy.

Both Travelers and CIC denied the University’s request for a defense and indemnity in connection with the underlying wrongful death suit. Travelers denied coverage, asserting that the policies did not cover the allegations in the lawsuit because the Athletics Participation Exclusion exempted bodily injury suffered during athletics, exercise, or sports activities. CIC also denied coverage based upon Travelers' denial and the exclusion in the CIC Policy relating to participation in events of an athletic or sports nature.

The University subsequently settled the wrongful death suit with the student’s estate and brought its own claim against its insurance agent for failing to procure adequate insurance that would have covered the student’s death. As part of the settlement of the suit against its insurance agent, the University assigned its rights under the two insurance policies to the agent and the agent commenced suit against both Travelers and CIC based on the insurers’ alleged failure to defend and indemnify the University in connection with the now-settled wrongful death suit.

The insurance agent argued that the allegations in the wrongful death suit were covered under the primary Travelers Policy’s definition of “bodily injury,” as amended by the Xtend Endorsement. Specifically, since the claims made by the student’s estate were based on alleged negligence by the University as part of the medical pre-screening process and the emergency assistance provided at the time of the incident, the agent asserted that the claim was covered by the Xtend Endorsement’s extension of coverage for “incidental medical malpractice injury.” Under this endorsement, the definition of bodily injury was expanded to include injuries “resulting from … the rending of, or failure to render … medical … service or treatment, advice or instruction.”

Rejecting the insurance agent’s argument, the district court relied on other language in the Xtend Endorsement that expressly stated that coverage for “incidental medical malpractice injury” did not apply where such coverage was otherwise excluded by the terms of the policy. Such an exclusion was found, the district court held, in the Athletic Participants Exclusion, which excluded coverage for bodily injury “to any person engaged in athletic, exercise, or sports activities” sponsored by the University or conducted on the University’s premises. Because the student’s injury and death resulted directly from his participation in a sporting practice, not from any negligent pre-participation medical screening or any emergency assistance rendered at the time of the incident, the Athletic Participants Exclusion was held to control and bar coverage. This same factual finding formed the basis for the district court’s application of a similar exclusion in the umbrella CIC Policy. There, the district court found that because the student was “practicing for or participating in any contest or exhibition of an athletic or sports nature” at the time of injury, the application of the exclusion was clear and unambiguous.

On appeal, the Sixth Circuit affirmed the holdings entered by the district court. The Sixth Circuit further held that the two endorsements are not, as the insurance agent argued, in conflict with one another. Specifically, the appellate court held that there is no inconsistency between its application of the Athletic Participants Exclusion to bar coverage in this instance and the extension of incidental medical malpractice coverage intended by the Xtend Endorsement. According to the appellate court, coverage would remain available to the University under the Xtend Endorsement, for example, in instances in which athletic trainers caused injury to a student athlete during a consultation while that student is not engaged in “athletic, exercise, or sports activities” otherwise excluded under the Athletic Participation Exclusion. While the Sixth Circuit noted its adherence to the standard doctrine of contra proferentem (i.e., insurance policies are to be liberally construed in favor of the insured), it also cited another standard doctrine of construction requiring exclusions to be strictly construed and held that “[t]his is an instances of the latter.”

This case illustrates the challenges and potential risks associated with multiple, competing endorsements that purport to modify the coverage provided elsewhere in an insurance policy. It also highlights the very real potential for a so-called coverage “gap” to occur in a liability insurance coverage program, and the consequence of such a gap when discovered only after a claim has already occurred. The challenges of ensuring that adequate coverage is procured as part of the insurance placement and renewal process is only magnified for insureds such as colleges and universities who have to evaluate and insure against a vast array of potential liabilities, many of which are unique to educational institutions. As a result, educational institutions at all levels should perform an in-depth and comprehensive review of the insurance programs that are vital to the ongoing success of these institutions and their administrators, staff, and students.