In a recent ruling, the Appellate Division of the Supreme Court of the State of New York addressed a significant insurance coverage dispute involving Hofstra University and its insurer, United Educators. The court's decision, issued on October 29, 2026, clarifies how insurance policies interpret the term "funds" in relation to tuition and fees paid by students. This ruling has implications for educational institutions and their insurance providers across the state.

The case, Hofstra University v. United Educators, arose from a disagreement over whether certain sums paid by students could be considered "funds" under the insurance policies in question. The court's ruling directly affects Hofstra University, which sought coverage for claims related to the return of tuition and fees amid ongoing class action lawsuits. The outcome of this case is crucial for universities that rely on insurance to protect against financial losses related to student fees.

Hofstra University and United Educators are the main parties involved in this case. Hofstra University filed a complaint against United Educators, asserting that the insurance policies issued by the defendant should cover losses arising from claims for the return of tuition and fees. The dispute escalated to the court after United Educators moved to dismiss the amended complaint, arguing that the policies excluded coverage for such claims. The case was filed under Index No. 653697/24, Appeal No. 6829, and Case No. 2025-02023.

The Supreme Court of New York County, presided over by Judge Lyle E. Frank, initially ruled in favor of Hofstra University by interpreting the term "funds" to include tuition and fees. The court found that the language in the insurance policies was clear and unambiguous. The ruling stated, "The plain meaning of the term 'funds' is sufficiently clear on its face to include the sums paid by students in the form of tuition and fees." This interpretation was pivotal in affirming the university's claims against the insurer.

The court also addressed the argument made by United Educators that the policies were illusory due to their exclusions. The ruling emphasized that the insurance policies remained enforceable for other covered losses, stating, "The policies are not illusory if it provides coverage for some acts; it is not illusory simply because of a potentially wide exclusion." This point reinforced Hofstra's position that while certain claims may be excluded, others may still be valid under the policy.

Furthermore, the court noted that the underlying class action lawsuits filed by Hofstra University sought more than just the return of tuition and fees. The complaints included requests for compensatory and punitive damages, injunctive relief, and restitution. The court ruled that dismissing the claims based solely on the exclusion of tuition and fees was premature, as the record did not establish that the only damages sought were for the return of money paid.

In its decision, the court pointed out that the insurer's argument regarding public policy and wrongfully acquired funds did not hold merit. The ruling stated, "Defendant's argument that the damages sought in the underlying class action lawsuits are based on wrongfully acquired funds such that public policy bars plaintiffs' claims is unavailing." This aspect of the ruling is significant as it clarifies the boundaries of insurance coverage in cases involving educational institutions.

The ruling also touched upon the insurer's duty to defend Hofstra University in the underlying lawsuits. The court explained that the duty to provide defense costs arises whenever the allegations in a complaint suggest a possibility of coverage under the insurance policy. The court stated, "The duty to provide defense costs must be construed broadly in favor of the policyholder." This clarification is crucial for policyholders in similar situations, as it underscores the importance of insurance coverage in legal defenses.

The court's decision has far-reaching implications for Hofstra University and other educational institutions. It confirms that tuition and fees paid by students can be included in insurance policy exclusions, potentially affecting how universities manage their risk and insurance needs. Additionally, the ruling sets a precedent for how similar disputes may be handled in the future, particularly regarding the interpretation of insurance policy language and the scope of coverage.

Moving forward, Hofstra University and United Educators may continue to navigate the complexities of this case. The ruling allows Hofstra to pursue claims beyond tuition and fees, which could lead to further legal battles over the extent of coverage provided by the insurance policies. The decision also opens the door for other educational institutions to reassess their insurance agreements and consider how such exclusions may impact their operations.

As for next steps, it remains unclear whether United Educators will appeal the court's decision. The court filing did not specify any intentions for further legal action. However, if an appeal occurs, it could lead to further clarification on the interpretation of insurance policies in educational contexts. Meanwhile, related cases may also be pending that could influence the outcome of this dispute.