Legal Standpoint: The Role of Liability Risks in Institutional Decision-Making

By Steve Dunham    //    Volume 28,  Number 4   //    July/August 2020

College and University lawyers are frequently asked to advise on the risks of legal liability. Consider the following topics: Title IX (will we be sued by the complainant, the respondent, or the government?), Greek life (will greater oversight increase our risks of liability?), employee claims of discrimination, student injuries, breach of contract, and major public policy issues such as affirmative action (how can we improve diversity without being sued for racial discrimination?).

Beyond risks that are standard fare for a higher education lawyer, liability risks are a frequent question in the age of the coronavirus: (1) If we reopen in the fall, and a student or employee gets sick, will we be sued? (2) In considering layoffs to cover revenue losses, what are the risks of employment litigation? (3) If we terminate this contract because we no longer need the product or service because of remote instruction and stay at home orders, will we be sued? 4) If we participate in a government stimulus program, what potential liability have we accepted? 5) Are there liability risks in changing the method of instruction?

For each of these (and many other) risks, lawyers are also asked to advise on mitigation strategies, financial exposure, likely outcomes, insurance, etc.

Beyond evaluating liability, trustees and senior executives face a larger question: What is the role of liability risks in decision-making? What weight do they deserve? What is the institution’s risk appetite? How should the institution balance liability risks against academic, reputational, financial, operational, and other considerations?

These are questions of leadership, governance, good judgment, morality, practicalities, context, and other attributes of decision-making. Lawyers may “own” the core legal analysis of liability risks, but how should decision-makers weigh the analysis in institutional decision-making? This is an art and not a science, but I offer the following five points for consideration:

1. Liability considerations must be balanced against the mission and core values of the institution. Boundaries and limitations (including liability) should be recognized, but decisions should be based on the best interest of the institution and the welfare of the communities it serves.

2. Who should decide? Ultimately the institution’s delegations of authority, express and implied, control, but the lawyer(s) should participate in the decision. There are too many variables and “what ifs” to separate the analysis of liability from the other parts of the decision-making process. Further, considering mission-related factors such as social, cultural, financial, reputational, moral, and political factors is a core part of a lawyer’s job.

3. Should the risk of liability dictate the outcome? The answer is “almost never.” Liability risks do not trump other factors. When giving advice on liability, lawyers do not want the risk of being sued to be the determining factor in decision-making.

4. Is it possible to quantify the decision-making process when evaluating litigation risks? Yes, but only in part. In considering the liability risks of a potential lawsuit where money is the remedy, one can assign numbers to the damages sought, the likelihood of success, etc. This process is subjective, but it can lead to a number such as “there is a 60 percent chance of an adverse verdict of $1 million dollars.” The client can weigh this risk against other variables.

5. What is the role of principle—doing the right thing—in making a decision that includes an evaluation of liability risks? Because of the primacy of the institution’s mission, principle should be the guiding light. Consider the range of decisions in the coronavirus crisis that include a liability component. In making a variety of back-to-school decisions, leaders may consider liability as one of the risks. But in balancing the risks, and making decisions that are right for their schools, leaders must keep the health and safety of their community front and center. That is the “principle” that should ultimately drive the decision-making. Liability risks exist, but they should not cloud clear thinking about mission, core values, and fundamental principles.

Steve Dunham, JD, is the vice president and general counsel for Penn State University.

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