By Hannah Shankman, GW Law, 2L
An Indiana appellate court upheld a trial court ruling on July 15, 2020 for several insurance companies, which had been sued by the National Collegiate Athletic Association (NCAA) after the NCAA lost a class action, case Jenkins et al. v. National Collegiate Athletic Association, in 2017.
In so ruling in National Collegiate Athletic Association v. Ace American Insurance, et al, the appellate court relied heavily on the “Related Wrongful Act Exclusion” of the NCAA’s primary insurance policy with the companies and case law.
Jenkins, an antitrust lawsuit filed by groups of Division I men’s basketball and football players, was successful in its challenge of the NCAA’s bylaws that limited the amount of compensation member institutions could offer student-athletes through financial aid. After its loss in Jenkins, the NCAA then tried to request $25 million in coverage for the lawsuit through its excess insurers (Insurers). However, the Insurers informed the NCAA that they were not required to provide the requested coverage, as the NCAA’s actions in Jenkins constituted activity that fell into the “Related Wrongful Act Exclusion” of the NCAA’s primary insurance policy. The NCAA subsequently filed suit requesting a declaratory judgment and damages.
In the lawsuit, the Insurers pointed out that the definition of Related Wrongful Acts was unambiguous—it constituted acts arising out of the same common nucleus of facts of a previously reported Claim, of which notice was given, before the inception of the present policy. This exclusion clause proved detrimental to the NCAA, as about a decade prior to Jenkins a similar antitrust class action was brought on behalf of Division I football players and Division I men’s basketball players in White v. National Collegiate Athletic Association. Here, the plaintiffs’ alleged that athletic scholarships did not cover the total cost of attendance, and due to unlawful horizontal agreements between universities, colleges, and the NCAA, an artificial cap was placed on the financial aid available to student-athletes that violated antitrust law. In 2008, a judgment was entered for the plaintiffs.
Approximately 10 years later, the NCAA still retained bylaws that regulated the amount of financial aid that institutions could offer student-athletes for their athletic performance, which prompted the plaintiffs in Jenkins to file suit. The Jenkins plaintiffs attacked the same scheme as in White and further alleged that; “all NCAA rules that prohibit, cap, or otherwise limit the remuneration that players receive for their athletic services” were illegal under the Sherman Antitrust Act. Again, the antitrust theory prevailed, and the court ruled in favor of the plaintiffs.
Considering this history, the Insurers for the NCAA in Ace American Insurance argued that coverage for Jenkins was precluded, as the Related Wrongful Act Exclusion clearly applied. After all, White was decided prior to the court’s ruling in Jenkins, and the two suits arose out of a common nucleus of facts surrounding unlawful caps on financial aid for student-athletes. The trial court agreed with these arguments and granted the Insurers’ motion for summary judgment.
On appeal, the Court reviewed whether the trial court’s ruling on summary judgment was proper. The Court utilized basic contract law principles to review the language in the NCAA insurance policy and held that the Related Wrongful Acts provision was unambiguous and not overbroad. Finding no genuine issues of material fact, the Court noted that the White and Jenkins action provided related claims pertaining to the scholarship scheme imposed on college athletes, and that both suits alleged similar violations of the Sherman Act and NCAA Bylaw 15. Accordingly, the Court upheld the motion for summary judgment, and found that the Insurers in Ace American Insurance did not have to provide coverage for claims related to the Jenkins lawsuit.
