As the legal and regulatory landscape continues to shift, colleges and universities are facing a growing set of complex risks. Federal enforcement trends are shaping that environment – from the expanded use of the False Claims Act (FCA) in civil rights investigations to increased scrutiny around antisemitism and funding for Hispanic-Serving Institutions. Antitrust activity and disability rights litigation also remain ongoing, which necessitates the discussion of what this could mean for institutional risk profiles and insurance coverage strategies.

Federal scrutiny

In May 2025, the Department of Justice (DOJ) launched the Civil Rights Fraud Initiative, signaling a new enforcement strategy that leverages the DOJ’s use of the FCA to investigate institutions that knowingly violate federal civil rights laws by “allowing [sic] and promoting divisive DEI policies” while receiving government funds.

The FCA, a powerful federal statute designed to combat fraud against government programs, allows whistleblowers — known as “relators” — to file qui tam lawsuits on behalf of the government. The FCA empowers the DOJ to issue civil investigative demands (CIDs), which can lead to costly litigation and substantial penalties. Additionally, a qui tam lawsuit can result in substantial financial penalties, including treble damages and civil fines. Traditionally focused on healthcare and defense, the FCA yielded over $3.8 billion in settlements and awards in the first half of 2025, eclipsing the amounts recovered in all of 2024.These record-breaking recoveries highlight the FCA’s financial impact and underscore the financial risks colleges and universities could face pursuant to this new initiative.

Building on the DOJ’s expanded use of the FCA, federal authorities have intensified scrutiny of how colleges and universities respond to antisemitic incidents on campus. Earlier this year, the DOJ began visiting universities with reported antisemitic incidents. At the same time, the Equal Employment Opportunity Commission (EEOC) chair announced a prioritization of investigations into antisemitism within academic institutions, both as places of learning and employment.

As a result of the investigations, the DOJ issued a notice of findings against UCLA, concluding that the university had been “deliberately indifferent” to complaints from Jewish and Israeli students during the spring 2024 protests and deemed the university’s response “clearly inadequate.” The fallout included a $6 million civil settlement with Jewish students and professors, a $339 million freeze in federal research funding/grants and an expanded congressional investigation into UCLA medical school’s treatment of employees and patients.

Investigations into antisemitism complaints continue, and federal scrutiny into diversity, equity and inclusion (DEI) policies has intensified – particularly where this scrutiny intersects with race, national origin and immigration status. Tennessee filed a lawsuit against the Department of Education challenging the existence of Hispanic Serving Institutions (HSIs). Tennessee’s main argument is that it is unfair that HSIs have access to grant funds that are awarded based on ethnic criteria, noting that “needy” Tennessee students may not get the benefit of scholarships or grants from HSIs only because he/she “doesn’t have the right ethnic makeup.” The DOE is set to award HSIs nearly $350 million this fiscal year to be used for faculty development, facilities and other purposes. There are currently 600 schools that qualify as HSIs that serve 1.5 million full-time Latino undergraduates and includes institutions with at least 25% Latino enrollment. HSIs are not required to use the money solely for Hispanic or Latino students. The DOJ recently declined to defend the HSIs in this lawsuit, leaving these institutions scrambling to defend themselves.

Meanwhile, throughout 2025 various state laws surrounding tuition rates for undocumented and resident aliens were challenged. States like Texas, Minnesota, Oklahoma, Kentucky and Illinois have found themselves on the receiving end of a DOJ-filed complaint. The Justice Department has taken aim at specific state laws that provide in-state rates for undocumented and resident aliens who maintain state residency. The DOJ argues that these laws are in contravention of an executive order seeking to ensure undocumented immigrants cannot obtain taxpayer benefits or preferential treatment. The Texas case is on appeal, as the trial court judge ruled in favor of the DOJ, refusing to set aside a previous ruling that its state law was unconstitutional. Many of these lawsuits also name state college and university boards of trustees. These cases will remain ongoing throughout the year.

Antitrust concerns

In tandem with federal civil rights scrutiny, colleges and universities continue to face antitrust concerns. Recent lawsuits and congressional inquiries suggest growing concern over how colleges coordinate financial aid policies and admissions practices. This aligns with the public’s declining trust in higher education, especially as affordability remains a significant barrier for many seeking a higher education.

In 2022, applicants to 17 elite universities filed a lawsuit claiming that those universities were part of the 568 Presidents Group – a consortium of exclusive private universities purporting to practice need-blind admissions. The 568 Exemption, part of the 1994 Improving Schools Act, exempts from federal antitrust law certain agreements between “institutions of higher education at which all students admitted are admitted on a need-blind basis.” The lawsuit lays out an alleged conspiracy among these universities to collectively favor those students requiring less or no financial aid, despite outwardly claiming that the application process is “need-blind.” Shortly after filing, the DOJ filed an amicus brief arguing that the 568 exemption “does not immunize agreements between schools that fail to admit ‘all students’ on a need-blind basis.” Since filing,12 of the 17 universities have settled and agreed to a $320 million settlement fund. These settlement funds do not include defense costs, which are likely in the multiple millions of dollars range per defendant.

This spring, the House Judiciary Committee and its Subcommittee on Administrative State, Regulatory Reform and Antitrust issued letters to Ivy League schools requesting documents and communications related to tuition pricing strategies and financial aid policies. This inquiry suggests a deepening federal interest in how these institutions coordinate financial matters.

Recently, college applicants filed a lawsuit against 32 colleges and universities, along with two major college application platforms, alleging that the schools use early decision admissions to limit financial aid obligations. Unlike regular admissions, early decision applicants must commit to an institution before receiving their financial aid packages, potentially disadvantaging students who need to compare offers to attend the most financially beneficial school. The students argue that access to competitive admissions and financial aid packages is significantly reduced.

Disability law

Legal developments in disability law are reshaping how institutions accommodate students with physical and mental health needs. A recent U.S. Supreme Court decision has lowered the burden of proof for students alleging discrimination while demanding injunctive or non-monetary relief. This shift reinforces the importance of proactive compliance with the Americans with Disabilities Act (ADA) and Section 504 requirements.

This summer, the Supreme Court heard a case seeking clarification on the appropriate burden of proof applicable to students filing lawsuits against schools and school districts.1 In A.J.T. v. Osseo Area Schools, a student with epilepsy sued a school district after being denied after-hours instruction, an accommodation she had previously received in a different district. The district claimed the support was too burdensome, but this decision left her with two fewer instructional hours per day than her nondisabled peers.

The Supreme Court considered whether violations of ADA or Section 504 required proof of intent. To receive compensatory damages, the student must prove discriminatory intent. However, in this case the court ruled that injunctive relief, such as mandating reasonable accommodation or orders for physical modifications for buildings, can be granted based on the discriminatory impact alone.

The court rejected the need for students to prove “bad faith or gross misjudgment” when bringing claims under ADA or Section 504. Instead, the court ruled it is sufficient to show that the school disregarded a “strong likelihood” that its actions would violate federally protected rights. This ruling lowers the burden for students and aligns with a broader trend of expanding disability protections in education.

While the case involved an elementary school district, the decision also resonates in higher education where the ADA and Section 504 prohibit discrimination against students with disabilities. Colleges and universities must provide academic adjustments and auxiliary aids; they are not required to offer personal services like tutoring or class attendants. Still, they must ensure students are not excluded or disadvantaged due to disability.

In a recent survey conducted by The Steve Fund, 40% of 2,050 college students said they were “extremely stressed about maintaining their mental health” while in college.2 With more people being diagnosed with anxiety disorders, the request for extended test time, reduced course loads and service-animal policies may become commonplace. Colleges and universities will need to have proper procedures in place for reviewing these requests in the context of the changing legal landscape.

As these legal and regulatory trends continue to unfold, higher education is facing new questions about how best to manage risk. From federal and state oversight, continued antitrust risks and disability litigation, the landscape is shifting in ways that could directly impact institutional operations. Now more than ever, it’s important for schools to take a fresh look at their insurance coverage strategies to make sure they are keeping pace with these evolving challenges.

Coverage considerations for these trends

Considering these developments, higher education institutions should take close look at their insurance programs, with attention to the following coverage considerations:

  • Directors and officers (D&O) policies with educators legal liability (ELL) endorsements
  • Employment practices liability (EPL) and third-party liability (TPL) policies
  • ELL policies

When facing actions brought by federal or state authorities, there are several key considerations that colleges and universities should keep in mind. Federal and state governments possess a range of investigative tools, including committee letters requesting information, subpoenas for documents or testimony, civil investigative demands and formal lawsuits. Any of these tools can result in a time-sensitive, time-consuming process that generally requires the involvement of counsel to navigate the complex political landscape. So, ensuring that your college or university has, at minimum, defense costs coverage is very important.

D&O coverage considerations

  • Definition of claim. The definition of “claim” may differ across D&O policies. While most policies start the definition of claim with a demand for monetary or non-monetary relief, other definitions vary in terms of how broad the scope of coverage may extend. Since the government often uses subpoenas to gather information, it’s important to review whether a subpoena is included in the definition of “claim.” Some policies extend subpoena coverage only to individuals, while others include both individuals and institutions. In some cases, coverage applies only if the individual is the target of the investigation. Other policies introduce a separate definition for “inquiry,” which may broaden coverage to include written demands for testimony or meetings with a government agency, or request a production of documents by a government agency.

These different treatments are important to note because federal and state governments cast a wide net while investigating and seeking information from colleges and universities by issuing subpoenas to employees, board of trustee members and the custodian of records for the college or university itself.

  • Regulatory and antitrust claims. Another consideration under the definition of “claim” is a regulatory proceeding. Some policies provide coverage for a regulatory proceeding against an insured commenced by the receipt of a notice of charges, while other policies consider a regulatory proceeding commenced by a formal investigative order or service of a summons. Other policies take a different approach by offering “regulatory claim” coverage by endorsement. Generally, these endorsements provide a sublimit of liability for a “regulatory claim” and can be subject to a separate retention and co-insurance, which requires the insured to pay a portion of the amount up to the sublimit of liability.

Some policies also add coverage by endorsement for antitrust claims. Similar to a regulatory claim, this endorsement includes an antitrust claim definition and antitrust claim sublimit, as well as imposes an increased retention and possibly a limited definitions of “loss.”

It’s important to note that while coverage may be afforded for the various types of “claims” outlined above, coverage may be limited to defense costs, with no coverage for indemnity. Thus, those amounts owed to the federal government as a fine or penalty may not be covered but may be used for other damages, judgments or settlements.

These are just some of the high-level D&O coverage considerations raised by these new trends.

EPL, TPL and ELL considerations

As federal and state governments start scrutinizing college and university responses to civil rights complaints, it’s important to look at the potential coverage under the EPL policy, which has EPL coverage for “claims” brought by or on behalf of employees. There is also TPL coverage that provides coverage for “claims” brought or on behalf of someone other than an employee alleging discrimination or harassment by an insured. Most EPL policies do not provide subpoena coverage; however, the definition of a “claim” generally does include an administrative or regulatory proceeding commenced by receipt of notice of charges, complaint or return of an indictment or similar document. Thus, defense cost coverage may not be available as early in an investigation under the EPL policy as it is under the D&O policy.

Some EPL policies provide limited crisis expense coverage for public relations consultant fees incurred by a college or university with the carrier’s consent. A “crisis” generally includes a congressional inquiry into violation of employment law. These costs are limited in coverage and scope and are policy-specific.

Colleges and universities may be exposed to claims for failing to provide educational accommodations. It’s therefore important to review the ELL and EPL coverages with the TPL coverage. Carriers treat these claims differently; some ELL policies may limit coverage to defense costs only for claims involving a student’s special educational needs, limiting coverage by not adding students to the definition of third party. Other carriers may provide sublimited coverage for this type of claim. Some EPL policies will include students in their definition of third party and provide TPL coverage for discrimination based on disability.

Regardless of how the policy treats these claims, universal coverage is not available for expenses related to implementing injunctive relief, such as constructing a ramp or providing other accommodations. However, the associated defense costs are often covered. With a lower burden of proof recently determined by the Supreme Court, it’s likely that these accommodation claims against colleges and universities will progress further in litigation, as they’ll most likely survive the dispositive motion stage. This means more dollars are spent on defending this type of case.

Market update

As the world continues to move beyond financial instability and uncertainty from the global pandemic, the liability insurance market for higher education institutions becomes more stabilized. Insureds can benefit from favorable pricing, retention and coverage at renewal, barring significant changes to their exposures. Despite the improved market, there remain fewer carriers in this space compared to other industries. Should any litigation or claims activity occur, alternative options become scarce. Educational institutions attract various legal actions, exposing them to a range of underwriting concerns. These include allegations of failure to educate, sexual abuse and molestation, discriminatory admission procedures, breach of contract and violating antitrust, regulatory and civil rights laws. Lawsuits such as these reduce market capacity and limit the availability of comprehensive coverage.

Compounding these challenges, other developments are contributing to volatility at renewal. One notable trend is the increasing number of general liability carriers choosing not to renew their programs due to sexual abuse and molestation claims. Institutions that previously relied on these broad policies to extend coverage to ELL and EPL are left scrambling to secure standalone options.

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NOTICE OF DISCLAIMER

Neither HUB International Limited nor any of its affiliated companies is a law firm, and therefore they cannot provide legal advice. The information herein is provided for general information only and is not intended to constitute legal advice as to an organization’s or individual's specific circumstances. It is based on HUB International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and HUB International does not have an obligation to update this information. You should consult an attorney or other legal professional regarding the application of the general information provided here to your organization’s specific situation.

1 ACLU, “ACLU Celebrates Supreme Court Decision in A.J.T. v. Osseo Area Schools,” June 12, 2025.
2 The Steve Fund, “TSF New Research: Student Mental Health on Campus,” accessed December 9, 2025.