(Moody's changes pending lawsuits to notices of intent in
WASHINGTON Jan 24 Shootings and other acts of
violence are becoming credit risks for U.S. institutions, with
fallout from the July 20 mass shooting in a movie theater in
Aurora, Colorado, spreading all the way to the bonds sold by the
University of Colorado at Denver, Moody's Investors Service said
"The shooting in Aurora is one of a number of tragic
violence-related incidents that have led to lawsuits against
universities and other not-for-profit organizations over the
last year," the rating agency said, noting that on Jan. 14 the
wife of a victim of the shooting sued the university.
"The lawsuits are credit negative for affected universities
because they create financial and reputational risks and divert
senior management's efforts away from other operating
activities," it added.
The victim's wife sued the university and staff there,
saying it should have warned authorities that the alleged
shooter, former student James Holmes, was a safety threat.
Moody's said "several other notices of intent have been filed."
State law limits claims against the university system to
$600,000 per occurrence regardless of how many people are
involved, which means that if the midnight-showing shooting is
counted as a single incident, the university could have to pay
out slightly more than half a million dollars, Moody's said.
But the law also has a limit of $150,000 per person, and if
each death is counted a separate incident the bill could be
It added that "the university can draw on the $927 million
of unrestricted financial resources it had as of June 30, 2012."
The college has said it believes the lawsuit to be not well
founded, legally or factually.
Beyond the sums of money the university may have to pay out,
it faces risks from damage to its reputation, which in turn
could drive students away from enrolling, Moody's said.
While the shooting ranks as one of the worst cases of U.S.
gun violence, it is not alone. Last month, a gunman shot and
killed 20 students and six teachers at Sandy Hook Elementary
School in Connecticut, his mother and ultimately himself.
U.S. Vice President Joe Biden is leading an effort to create
tougher restrictions on gun use but could face resistance from
Republicans in Congress.
Most credit risks to public universities stem from tuition
and enrollment problems, or cuts to state funding. But in
November 2011, Moody's began reviewing the credit stability of
Pennsylvania State University because of the school's child sex
abuse scandal, saying the university had to contend with direct
litigation costs as well as indirect effects on enrollment and
(Reporting by Lisa Lambert; Editing by James Dalgleish)