Class action complaints due to COVID-19 and the transition to online learning

Authors: John McLaughlin, Natalie Douglass

Higher education institutions felt the impact of the COVID-19 pandemic early on—from deciding whether students should return from spring break to how to transition to online learning from traditional instruction. Now, these higher education institutions face a continuing rash of lawsuits centered on those very decisions.  Beginning in early April 2020, class action litigation began to be filed against colleges and universities alleging that the defendant institutions have failed to deliver educational services, facilities, access or opportunities as a result of the COVID-19 shutdown and transition to online learning. This report explains the general anatomy of the complaints that Gallagher’s education clients have filed with insurers, as well as feedback as to how the insurers are responding to these claims.  

It is important to emphasize that this report was written taking into account the claims that Gallagher clients have seen and what we know to be insurer responses to those insurance claims. It does not account for other similar claims filed against non-Gallagher clients. In addition, we refrain from citing which insurance claims were the basis of our review to protect client confidentiality. 

Class action higher education & tuition complaints

The class action higher education and tuition complaints filed against colleges and universities have many similarities. The complaints are generally brought by a student or students on behalf of a purported class. Interestingly, a couple of recent higher education and tuition complaints are brought by parents of students, rather than students. 

The higher education and tuition complaints also may share a common theme in the allegations, notably:

  • There has been a diminution in the value of the degree, education, etc. or a decrease in the quality of education by virtue of online learning versus in-person instruction;
  • The institution charged tuition for in-person instruction and did not fulfill that obligation, substituting online instruction that should be valued at a lower tuition rate; and/or
  • Meal plans and lodging/room and board were charged for, but unused due to the shutdown.

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Exploring higher education & tuition claim theories 

The legal theories alleged are generally breach of contract, unjust enrichment, and conversion. It is interesting to note that the facts of the higher education and tuition complaints generally read as “failure to educate” claims but the legal theory articulated is grounded in a breach of the student contract. Some have speculated that this is a strategic play by the plaintiff attorneys bringing the cases to achieve class certification as student contracts are likely consistent among a student body to achieve commonality requirements of class certification. Whereas, if the plaintiff’s bar were to allege a failure to educate cause of action, it would be considerably harder to achieve commonality of fact among a purported class.

To a lesser degree, some are also alleging violation of state consumer protection laws.

There is also some consistency in which plaintiff firms are bringing class action suits. It is common for multiple law firms to join together to bring a particular suit, sometimes up to 4 or 5 law firms in various combinations. However, in the cases that Gallagher has reviewed, the two most frequently listed plaintiff firms are:

  • Bursor & Fisher (29.4%)
  • Anastopoulo Law (29.4%)

Insurers’ response to the higher education and tuition complaints

There is no standard Directors & Officers Liability (D&O) or Educators Legal Liability policy, and coverage terms, conditions and exclusions vary within the insurance market. It is essential to consult with legal counsel regarding your insurance policy and any tuition case pending against you. 

To date, we have reviewed coverage position letters from three insurers. We anticipate receiving additional coverage letters from other insurers over the coming months which may necessitate updates to this report. That said, certain generally relevant provisions to consider with respect to these cases include the following:

  • Breach of Contract Exclusion – Note that the policy language varies to some degree among insurers, but this exclusion is being cited in coverage letters to preclude coverage.
  • Definition of Loss and/or Return of Funds Exclusion – The policy language also varies among insurers, but generally insurers are citing to provisions relating to disgorgement, the return of funds, etc. as being uncovered.
  • Gaining of Profit Exclusion – Insurers are also citing the ill-gotten gains exclusion as being potentially relevant.  Note, these exclusions may have a delayed trigger until some sort of adjudication on the underlying matter.
  • Bodily Injury/Property Damage Exclusion – Some insurers are citing absolute bodily injury/property damage exclusion as being potentially relevant.  Note that the absolute language is typically “arising out of, based upon, or attributable to” bodily injury, illness, sickness, etc.
  • Pollution Exclusion – Some insurers are citing the absolute pollution exclusion as being potentially relevant.

Insurance coverage has been largely denied for these matters. Of the coverage position letters we have received to date, 70% are denials and the remaining 30% are providing a small defense costs allocation. To date, those circumstances have been when the complaints have alleged a diminution of the value of the degree or some sort of consumer protection violation. One insurer is reserving rights as to whether the breach of contract exclusion applies to claims of unjust enrichment or conversion. Accordingly, the limited coverage available hinges upon the nuances of the complaint, the terms of the specific policy language, and the insurer’s overall stance on these matters. 

When looking at the insurance coverage positions received to date on claims brought by the two most prevalent plaintiff firms, Bursor & Fisher and Anastopoulo Law: (1) 100% of the claims by Bursor & Fisher have been denied; and (2) 14% of the claims brought by Anastopoulo Law have been denied with remaining 86% being offered a small allocation of defense costs by the carrier. Again, this correlation is based upon the nuances of the complaint and it appears the complaints drafted by Anastopoulo tend make allegations based upon the value of the educational degree or program instead of or in addition to a breach of contract allegation or some sort of state consumer protection violation. When looking at the insurance claims from all other law firms, 15% were offered a small defense costs allocation (again, alleging consumer protection), while the other 85% were denied. 

While disappointing, we hear from many clients that their current focus remains launching a strong defense for these matters, with many entering the initial stages of a motion to dismiss.  It is recommended to consult with outside insurance coverage counsel as well.

Author Information:


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