Small print is getting enormous attention as the novel-coronavirus crisis triggers what promises to be a tsunami of college litigation and insurance claims. Billions of dollars are at stake, and suits related to the pandemic will last years, according to more than a dozen higher-education lawyers, risk-management consultants, and insurance experts.
“There are so many unknowns due to the breadth of this virus event,” said Mark J. Turkalo, a senior vice president at the insurance brokerage and risk-management company Marsh. Because the catastrophe is still unfolding, it will be a year before even the scale of colleges’ losses comes fully into focus, he said, and insurance companies themselves are reluctant to offer general guidance on policy coverage and might be at risk “if they open up the floodgates.”
“There is no playbook for what we’re going through,” he said.
There’s no contractual obligation to provide a particular type of curriculum.
Peter Lake, a higher-education law expert at Stetson University, speculated that “the total of all college claims will be in the billions.” He called the situation “the mother of all business-interruption insurance crises.”
College lawyers were overwhelmed even before the pandemic with Title IX harassment cases, sex-abuse scandals, and a bevy of other issues. Now they must weigh in on every major aspect of facilities and procedures, and hurry to file the insurance claims with accompanying documentation of losses.
While insurance brokers and advisers help college lawyers assess and predict the financial casualties, those lawyers are also trying to peer into the murky future. College boards and leaders are asking them to weigh in on matters far from their usual domain.
“What are we triaging? Everything,” said Joshua W.B. Richards, vice-chair of the higher-education practice at the law firm Saul Ewing Arnstein & Lehr.
Lawyers are responding to suits seeking return of tuition and room-and-board fees while studying state licensing requirements for remote-learning and teletherapy platforms. They are anticipating the risks to students and employees of campuses reopening even as they eye disability accommodations for students learning online. Add to that their finalizing mutual-aid agreements to house first responders and Covid-19 patients in dorms; gauging liability for personal protective equipment manufactured by colleges; and worrying over contamination from lab research.
Colleges “want to pitch in and help. It’s inspiring,” said John McLaughlin, senior managing director in the higher-education practice of Gallagher, an insurance, risk-management, and consulting firm. But “we want to make sure we’re not jeopardizing the financial integrity of the institution in doing so.”
When you add the legal tangles to the logistical ones, the prospect of fall, or maybe even spring, campus openings looks decidedly dicey to many of these experts.
The Class Actions Begin
The initial suits are over tuition and room-and-board costs, but experts say that those are just the first wave of Covid-19-related college litigation and, compared with what’s ahead, serious but not particularly worrisome.
What are we triaging? Everything.
Students recently sued Drexel University and the University of Miami, for instance, saying they should get refunds on tuition and other mandatory fees. The students said that they had paid to attend in-person classes and access the universities’ facilities — labs, libraries, art centers, gyms — but now that courses have moved online and campuses shut down, the universities have broken their contracts.
The students’ complaints pointed to marketing materials used by the universities to tout opportunities for “experiential learning” in the case of Drexel and “interaction with other students, faculty, and staff members” at the University of Miami. But the students said that since social-distancing measures were put in place, they have been “deprived of the benefits of on-campus learning,” and that the value of their degrees will be diminished.
Legal experts said that these cases probably would not succeed in court. Daniel A. Kaufman, a lawyer at the firm Michael Best who represents colleges, said they reminded him of cases filed against law schools after the 2008 recession that accused the schools of misrepresenting their ability to place graduates in jobs.
As colleges and universities have struggled to devise policies to respond to the quickly evolving situation, here are links to The Chronicle’s key coverage of how this worldwide health crisis is affecting campuses.
Those cases were unsuccessful. A judge wrote in 2012 that they “exemplify the adage that not every ailment afflicting society may be redressed by a lawsuit” in his decision to dismiss a case against New York Law School.
Kaufman said the recent lawsuits will most likely be dismissed as well. “There’s no contractual obligation to provide a particular type of curriculum.” Pointing to the switch to online learning, he said, “Institutions are still meeting accreditation requirements. Students are still meeting their degree requirements.”
A Drexel spokeswoman said the university’s facilities were closed because of statewide orders. “Students continue to have access to Drexel’s broad spectrum of academic offerings and support,” she said. University of Miami administrators said they “continue to monitor” the lawsuit. Jacqueline R. Menendez, vice president for university communications, said that the university is “providing a robust online learning environment, and proactively working with all of our students and their families to make it through this difficult time.”
A suit against Liberty University is more complicated. It alleges that the university reopened after spring break, even though its academic content had moved online, to avoid returning student fees for room, board, and activities. In so doing, the suit alleges, Liberty put students needlessly at risk. “Liberty University is, in a very real sense, profiting from Covid-19,” the lawsuit reads.
Mayors and governors have sovereign immunity, but boards of private colleges don’t, said Jim Newberry, leader of the higher-education practice at the law firm Steptoe & Johnson. In being unwilling, or perhaps unable, to rein in Liberty’s president, Jerry Falwell Jr., who reopened the campus despite a state stay-at-home order, Liberty trustees made the university “a big target,” he said.
“That just astounds me, that they’d make that decision. … In matters of grave policy like that, the board has got to step in and exert its rightful authority.”
Asked for comment, Liberty University emailed The Chronicle that it “has tirelessly attempted to balance the needs of students, employees, and the community as it has navigated through the unprecedented health challenges presented by Covid-19” and “taken into account the economic impact and legal rights of all the parties involved. While it’s not surprising that plaintiff class-action attorneys would seek to profit from a public-health crisis, we don’t believe this law firm or its single client speaks for the vast majority of our students.”
Maneuvering in a Legal Storm
Natasha Romagnoli, a partner in the insurance-recovery practice of the law firm Blank Rome, said that “it’s really critical for every college to create an outbreak-response team” with representatives from academic affairs, health services, housing, security, communications, food services, residential affairs, and other offices. “Bring people together to talk about the different risks that they’re seeing,” she said, “and you’re eliminating any silo effect.”
And for all the chaos, there is considerable agreement among Newberry; James A. Keller, of Saul Ewing Arnstein & Lehr; Paul G. Lannon Jr., of Holland & Knight; and other legal experts on how to handle some urgent compliance and regulatory issues.
Tuition and room-and-board refunds. If a college is able to complete the semester with online offerings under the extraordinary circumstances of the pandemic, courts will probably side with the college in keeping tuition revenue. The basic bargain (tuition paid, academic requirements met, credit provided) has been met. But if the college has the resources to refund some tuition nonetheless, given that online delivery is not always ideal, it may wish to consider that option, from both the legal standpoint and to retain the good will of students and their families. Those students will (ideally) become alumni someday, and when they consider whether or not to give to their alma mater, they’ll remember how they were treated in trying circumstances.
If at all possible, rooms not occupied and meals not eaten should be reimbursed, or credits offered, on a prorated basis, for when students return. At the least, colleges should put possible refund money into escrow until it’s clearer how the fall term will play out.
International and homeless students who remain on campus. Distance them from one another, and arrange for food delivery or pickup in accordance with local, state, and federal guidelines. If they have symptoms or have been exposed to the coronavirus, quarantine them accordingly. Just because most students have gone home doesn’t mean colleges won’t face lawsuits over virus exposure among the few students that remain. Those suits might not be successful, but minimize your risk.
Dorms, labs, and medical properties used for first responders and recovering Covid-19 patients. Some such arrangements occur by order of a governor. Others are offered by colleges that want to be of service. Either way, draw up and read contracts carefully to lower the chance not just of infection and contamination, but also of litigation. Make sure terms are clear for how and when the properties will be vacated and who has responsibility for disinfecting them.
Compliance with the Americans With Disabilities Act. The priority has been to move courses online, with fine-tuning to come later. But colleges would do well to treat every disability and accommodation request as carefully as they would if students were still on campus. Document what has been asked, and what efforts have been made to meet those needs.
Title IX and other infractions. Privacy issues arise as students and faculty members peer into each others’ homes during online classes. More instances will arise of sexual and other misbehaviors, or abuse and harassment witnessed over webcams and smartphones. “You’re in a Zoom class and you hear a person scream in the background, ‘Stop hitting me!’” said Stetson’s Lake. “What do you do? There’s a mandatory-reporting law. Do you stop class right then and call it in?” Colleges should update student and faculty conduct codes as soon as possible to make clear what won’t be tolerated, what needs to be reported, and when.
Accreditation issues. As the exigency of campus evacuations transitions to new norms of distance and hybrid learning, colleges, as well as regional and professional accreditors, are assessing what counts as class time, and what remote experiences qualify as practicums. Consult closely with those accreditors and adjust curricula accordingly, particularly heading into a fall term likely to see a patchwork of in-person and remote offerings.
State remote-learning and teletherapy licensing. So far, states have been lax in enforcing, or have even waived, strictures on courseware and mental-health counseling across borders. Keep abreast of requirements as colleges settle into new norms, however lasting, and make sure academic-affairs and counseling offices are working hand-in-glove with general-counsel offices to comply with state laws.
When students, faculty, and staff return. Whether it’s in 2020 or 2021, the return of students and faculty members will raise numerous questions regarding health, safety, employment, and discrimination laws. Even with new distancing rules on the books — students’ perhaps wearing masks and dining in shifts, for instance — informed-consent documents and waivers acknowledging and accepting Covid-19 risks will very likely be required, much like the waivers skiers sign to indemnify resorts when they buy lift tickets.
Testing and tracking students and employees for coronavirus exposure will bring up privacy and notification issues. “That’s the elephant in the room,” said Jerry D. Blakemore, general counsel for the University of North Carolina at Greensboro and chair of the board of the National Association of College and University Attorneys.
Faculty and staff members, because of age, compromised immunity, or other health risks, might refuse to teach in person. Colleges will need to be particularly careful to provide equal arrangements to all involved and not discriminate on the basis of age, health, or other factors, even more so as they downsize, merge, or close during this period of severe financial stress.
Insurance Mayhem
Colleges are dealing with “exposures that they never anticipated, nor did their insurance companies,” said Gallagher’s McLaughlin. No one at this point can confidently ballpark the dollars in play, he says, because insurance policies have complicated waivers and coverage caps, and colleges are still taking stock of current and anticipated damage. It’s not just a question of lost tuition, room, and board but also revenue from auxiliary services and athletic events, and hits to fund raising.
What’s clear, he said, is that the dollars at stake are “astronomical.”
Insurers sorting through the financial wreckage wrought by the coronavirus won’t respond to claims quickly. Nevertheless, those in the industry say, colleges should file those business-interruption, property, event cancellation, workers’ compensation, and other claims as soon as possible, documenting in detail their immediate and anticipated losses.
Mark Goode oversees the public-entity and education practice at Willis Towers Watson, a risk-management, insurance brokerage, and advising company. He’s telling clients: When in doubt, make a claim and don’t dawdle. Even losses not covered now might become covered retroactively under emergency state or federal actions, as with flooding and other catastrophes in the past. Courts will sort through those claims for years, Goode said, but the last thing a college wants is to discover that it could have received coverage but won’t because it violated the timely reporting provision of its policy.
If you are a small college, you may be covered by a single broker’s or insurance company’s package of policies. If you’re a large research university, with research and medical facilities, you might be covered by a range of policies from different insurers. Either way, each policy is its own carefully tailored individual contract, not a boilerplate clone. So colleges shouldn’t assume anything and should go through policies with a fine-tooth comb, experts advise.
Following the SARS outbreak of 2003, many insurers started including virus-related waivers or capping coverage related to communicable disease. But some policies might have been drawn up pre-SARS and won’t include such waivers. Even if they do, the waivers’ language varies considerably. Some refer to “communicable diseases,” “pollutants,” “hazardous material,” “contaminants,” or other general terms. Others are very specific and waive coverage only for, say, “influenza” or bacterial outbreaks.
Insurers will examine policies’ language carefully and interpret it narrowly, said William M. Moran, a crisis-management lawyer at Otterbourg. They must, because if they don’t they can be sued for colleges’ consequential damages. “They need to tread very carefully,” he said.
Colleges’ annual insurance policies are generally bought or renewed each July. The data they’re based on is normally compiled by the end of May. This year, of course, while initial losses can be approximated, estimates will be a moving target. Insurance brokers and risk managers say colleges will try to keep their premiums down by arguing to insurers that, yes, the coronavirus has taken a huge toll, but empty or more sparsely populated campuses and curtailed or eliminated athletics programs minimize abuse, concussion, Title IX, and other insurance risks. Whether insurers will be swayed by that reasoning remains to be seen.
All that’s certain is that the higher-education insurance climate will never be the same. Sexual abuse and molestation scandals already created insurance price issues for colleges. Premiums are going up and many insurers are capping their liabilities and restricting terms and conditions, said Goode.
The Covid-19 crisis is “so big,” he said, “that insurers don’t have the data yet to know how to price it.” However the numbers tally up, though, the pandemic “will change the way that the business is run.”
