Colleges and universities have long been held responsible when students are killed or injured in travel-related accidents in vehicles owned by the institutions themselves. But campus officials have typically been able to rest assured that if they send athletes or other students off on rented buses or other vehicles, most liability in the unlikely event of a serious accident would will fall to the transportation providers' own insurance. (And a good thing, too, given how frequently many colleges and universities contract out for such services for student activities of various sorts, including intercollegiate sports.)
A ruling last week by Ohio's highest court challenges that assumption for colleges in that state. The decision by the Supreme Court of Ohio drew significant news media attention in the state and elsewhere because it appears to open the way for more compensation for the families of the five Bluffton University baseball players who were killed and others who were injured in a highly publicized 2007 bus crash on a Georgia highway.
Victims of the crash received compensation from the bus company, Executive Coach, and from the State of Georgia, but lower courts in Ohio had rejected the plaintiffs' efforts to hold the university responsible for the accident as well, ruling that the bus company and its driver -- who was deemed to be negligent in the accident and was, with his wife, killed in the crash -- could not be considered as "insured" under Bluffton's automobile insurance policy with Hartford Fire Insurance Company.
Because the university had contracted with the bus company for transportation services, and had no control over the bus or its driver, “Bluffton College could not be found to have owned, hired, or borrowed the vehicle at the time of the accident,” the original trial court ruled.
But in considering an appeal by the accident's victims, the Ohio Supreme Court saw the arrangement between Bluffton and Executive Coach differently. The "omnibus clause" of Bluffton's policy with Hartford, the court noted, defines as "insured" by the policy "[a]nyone else while using with your permission a covered ‘auto’ you own, hire or borrow,” and the driver does not meet any of five exceptions to that clause that are contained in the policy.
"On its face, it is clear to us that the omnibus clause applies to the case before us; Bluffton hired the bus from Executive and granted permission to [the chosen driver] to drive the bus," the Supreme Court said in its ruling. "Whether the insurance company intended the clause to apply is immaterial because the language of the policy supports a conclusion that [the driver] is an insured" party.
The court distinguished Bluffton's policy from those cited in other federal and state court rulings, including one that excepted from coverage "agents and employees" of the vehicle's owner, instead of just the owner and his family, as was true with Bluffton's policy. Given the facts of the case and how the university's policy is written, the court concluded, the university and its insurer are liable, opening the way to as much as $21 million in additional damages for the crash's victims, The Columbus Dispatch reported.
Two of the Supreme Court's seven members dissented from the majority's ruling, writing that its opinion "unreasonably extends coverage to a third party and effectively opens the door for similar claims under other scenarios because the omnibus clause is standard in many insurance policies."
That is precisely what troubles higher education legal experts about the Ohio court's ruling, even though it applies only to institutions within the state's borders.
Ada Meloy, general counsel at the American Council on Education, said that most college officials tend to figure that if "the institution hires a bus company that has a certificate of insurance, that's it, they're protected." But if plaintiffs believe they have not gotten sufficient recompense from those directly responsible for an accident and seek to hold others accountable, Meloy said, institutions can be vulnerable "if their policies are not drafted carefully to protect them."
"The Hartford policy did not extend exceptions to the agents and employees of the vehicle owner, which is what caused the real problem here," she said. "College and university risk managers should be looking to see whether their policy has the same language as this Hartford policy."
Mark Briggs, former risk manager at the University of Illinois at Urbana-Champaign and now a consultant at Safety Management Resources Corp., called the decision "another wakeup call for colleges and universities."
"What this did ... was shatter the false perception that you were transferring all of the financial risk" when a college or university contracted with an insured provider to transport students or others off the campus.
While "we may have thought this risk was completely transferred," Briggs said, "what this decision shows is that once you use up the insurance limit [of the transportation provider], plaintiffs may look to your own limits" for recompense.
The Bluffton ruling may have limited direct applicability as written, Briggs said, given that it applies only in Ohio and would appear to cover only ground transportation (though he said the principles raised in the case could "create some concerns for charter aircraft travel," too).
But "I think it is prudent for anybody who has responsibility [for campus legal or risk matters] to say, 'I don't want to wait until this happens to us or happens in our state to make sure that our college or university is covered' " by its insurance policy. That's especially important, Briggs said, because if a court concludes (as the Ohio court did) that a university can be held liable for a serious incident, and its policy doesn't protect it, the institution itself could be financially responsible for the damages.