The university filed its liability claim under the 2004 PMA policy, contending a continuous-trigger theory. Penn State contends that it is entitled to a defense under each of the PMA policies that were in force during the period of the alleged continuing abuse.

Additionally, the university believes it is entitled to designate the policy that it wants to call up—namely, the 2004 policy.

To the contrary, PMA has indicated that it may provide coverage for the negligence allegations (and applicable defense) only under its 1991 policy, positing a theory that only the policy in effect at the time the alleged injury first commenced may apply. It has reportedly denied all coverage obligations from 1992 through the current policies.

The issues here are complicated—and the damages could be astronomical. It is impossible to predict how Penn State will fare in its battle with PMA. Keep in mind that PMA has insured Penn State's liability exposure continuously over the last 50-plus years.

But coverage is contractual in nature, and a number of issues will arise and be argued in addition to the question of which policy is triggered. Among these are exclusions that PMA notes in its reservation-of-rights letter:

• Potential intentional-act exclusion: Does this exclusion apply to the university and Sandusky (the alleged perpetrator) or only to Sandusky?
• The known-loss exclusion: Did Penn State really have knowledge, suspicions or neither?
• The insurability of punitive damages: Pennsylvania has permitted the insurability of punitive damages for vicarious liability. If Penn State is held vicariously liable here, would PMA find itself responsible for potential punitive damages? (This, of course, hinges on there being coverage in the first place.)
• The presence of an abuse/molestation exclusion on PMA's 1992 policy: The application of this exclusion hinges on the policy that is triggered (if one is). In addition, does the exclusion reach to the university or only to Sandusky?

Penn State has a rough course on this one, and the battle with PMA will be a long one. I imagine that the university's D&O insurer is more likely working with Penn State in dealing with various coverage scenarios. Stay tuned for some of the issues that we can speculate about under the D&O policy.