Suits Alleging Anticompetitive Conduct by NCAA Deemed Related
The Indiana Court of Appeals, applying Indiana law, has held that two lawsuits filed against the NCAA claiming that it and its member schools engaged in anticompetitive conduct detrimental to student-athletes arose from Related Wrongful Acts. Nat’l Collegiate Athletic Ass’n v. Ace Am. Ins., 2020 WL 3983041 (Ind. Ct. App. July 15, 2020). Based on this conclusion, the second lawsuit was deemed to be a Claim first made at the time the earlier suit was noticed and no coverage was available under the policies in force when the second suit was filed.
The NCAA – an association of colleges and universities – sets and enforces many rules governing the relationship between student-athletes and the schools they attend. The association and its member schools were accused in two lawsuits of anticompetitive behavior that favored the interests of the schools over those of the student-athletes. The first suit at issue – filed in 2006 and settled in 2008 – alleged that caps on financial aid were artificial and only persisted as a result of unlawful anticompetitive agreements. The second suit, filed in 2014, challenged multiple NCAA rules that generally limit the benefits that schools can offer to student-athletes.
The excess carriers on the risk at the time that the second lawsuit was filed denied coverage based on a prior notice exclusion, which applied to any Claim arising out of “the same or Related Wrongful Act[s] alleged or contained, in any Claim which has been reported” under a prior D&O policy. The 2012-2014 primary policy defined “Related Wrongful Acts” as Wrongful Acts “which are the same, related or continuous, or … which arise from a common nucleus of facts. Claims can allege Related Wrongful Acts regardless of whether such Claims involve the same or different claimants, Insureds, or legal causes of action.” The trial court granted summary judgment to the insurers.
On appeal, the NCAA first argued that the related claim language could not be read literally because doing so would negate all coverage, citing to Indiana cases reaching that conclusion with respect to absolute pollution exclusions and therefore construing those exclusions against insurers. The court found the pollution cases inapplicable to the different policy language before it.
The court then analyzed Indiana caselaw concerning related claims language (which had found the term “interrelated” to be ambiguous, but the term “related” to be unambiguous) and held that the relevant policy’s related claims language was not ambiguous and could embrace either a causal or logical connection. Despite distinctions including the identity of the groups of plaintiffs in each suit, the time periods of the conduct challenged, the specific bylaws challenged, and the nature of the relief sought, the court held that the two cases both arose from a “common nucleus of fact,” i.e., the “scholarship scheme imposed on student-athletes” created by the NCAA’s bylaws.