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State Farm refuses to defend gym owner in abuse case

On Behalf of | Apr 25, 2018 | Business Law |

Business owners need to take note: Insurance companies can and will refuse to defend and indemnify clients who deliberately fail to protect their clients or participate in illegal activities.

That’s what’s currently happening to a gym owner who is caught up in the sexual-assault scandal involving Olympic gymnastics doctor Larry Nassar. The physician has made extensive headlines for abusing numerous young athletes in his charge over the years. He was recently sentenced to 60 years in prison and faces additional charges that could result in over 100 years of additional time.

The gym and its owner are among defendants named in numerous lawsuits by Nassar’s victims, who accuse the owner of having clear notice of the abuse happening on the premises for nearly 20 years. At least $75,000 in damages has already been awarded.

However, the gym’s insurer, State Farm, refuses to pay. The insurer has filed a lawsuit claiming that the gym owner’s failure to act after being warned of Nassar’s crimes excludes the company from having to provide coverage — including the use of a defense attorney against any civil lawsuits the owner may still face.

State Farm’s stance isn’t necessarily unusual. Business owners rely deeply on their insurance companies to protect them from lawsuits that can destroy their business and throw them into financial ruin. However, insurance companies routinely deny coverage if there’s evidence that a business owner acted maliciously, willfully or criminally.

If you own your own business, don’t let someone else’s misdeeds put your enterprise in jeopardy. One of the best ways to protect your company’s future is to protect yourself from charges that you permitted an unsafe environment to continue. Have written policies in place that tell supervisors and others in authority how they are to respond to any allegations of wrongdoing on the premises and take aggressive action when necessary.

Source: Insurance Business America, “State Farm says it’s not obligated to cover gym owner in Nassar abuse case,” Ryan Smith, accessed April 12, 2018


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