Arch Insurance Says Policy Doesn’t Cover USC’s $215M Sex Abuse Settlement

By | August 15, 2019

Arch Specialty Insurance Co. is arguing in a recently filed a lawsuit that it shouldn’t have to cover the University of Southern California’s $215 million settlement in a case in which the school’s gynecologist was accused of sexual assault because a policy it issued to the university includes an abuse or molestation exclusion.

The lawsuit concerns excess healthcare professional liability policies for 2017 and 2018 with a limit of $10 million of liability for each of the two periods at issue. Each of the Arch policies provides insurance excess of $100 million in underlying coverage provided by several different insurance carriers, according to the lawsuit.

The suit was filed on Aug. 9 in the U.S. District Court of Central California. It alleges that as the 2017-18 policy was expiring in May 2018, USC learned that the Los Angeles Times planned to run a story accusing the university of allowing Dr. George Tyndall to continue practicing as a gynecologist in the Student Health Center despite him being accused repeatedly of misconduct toward young patients over several years.

“Recognizing that lawsuits were sure to be filed in the wake of this story, USC’s insurance broker Chivaroli & Associates, Inc. (“Chivaroli”) suddenly contacted Arch and demanded on behalf of USC – without revealing the impending allegations about Dr. Tyndall – that Arch amend its policy to delete the Abuse or Molestation Exclusion,” the lawsuit states.

Hundreds of students and alumni accused Tyndall of committing sexual or inappropriate conduct during physical exams. Tyndall denied the allegations.

A $215 million settlement, which includes groundbreaking campus reforms, would provide between $2,500 and $250,000 each to women who say they were abused between 1989 and 2016.

A university spokeswoman was contacted for comment on the Arch filing but didn’t have much to discuss.

“We are aware that a complaint has been filed, but have not yet reviewed it in detail,” spokeswoman Lauren Bartlett replied via email.

Executives in USC’s risk management office were also reached out to for comment for this article but were not immediately available.

The attorneys who filed the lawsuit on behalf of Arch couldn’t be immediately reached for comment. A spokesman for Arch who was contacted on Wednesday said the company has no comment.

The lawsuit notes that Arch did not agree to provide coverage for abuse or molestation claims, and that USC accepted Arch’s coverage on that basis.

“USC, through Chivaroli, has recently renewed its demand and has threatened to bring litigation if Arch does not capitulate,” the lawsuit states. “Because litigation is inevitable, Arch brings this action seeking declaratory relief.”

Executives at Westlake Village, Calif.-based Chivaroli & Associates, which specializes in the healthcare field as well as other areas, were not immediately available for comment.

The lawsuit seeks rescission of the 2017-18 policies if the abuse or molestation exclusion is not determined to be part of the policies and enforceable.

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 USC investigation found in 2017 that he 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 Arch in the dark,” the lawsuit states. “Had Arch known of these material, serious allegations and the underwriting risks they presented, at a minimum, Arch 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.”

Arch is a Bermuda public limited liability company that writes insurance, reinsurance and mortgage insurance worldwide. Shares of the company (ACGL) were down $1.13 to $38.33 on the Nasdaq on Wednesday.

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