In the court order, Philadelphia Court of Common Pleas Judge Gary Glazer writes that that the Pennsylvania Manufacturers' Association Insurance had claimed that a child allegedly reported to Paterno in 1976 that he had been molested by Sandusky.
The order also says that the insurance company had claimed that in 1987 and 1988, other assistant coaches said they saw Sandusky engage in inappropriate sexual conduct with children.
Before these allegations, the earliest known incidents involving Sandusky were in 1994.
The claim came out of a legal dispute over whether the insurance company or Penn State should pay the approximately $60 million owed by Penn State in settlements to the 26 men who say Sandusky abused them when they were boys.
Sandusky was convicted of 45 of 48 charges of molesting 10 boys at Penn State and other locations from 1994 to 2008, when Sandusky ran a charity for disadvantaged youth called Second Mile. He is serving 30 to 60 years in the state prison in Waynesburg.
Gene J. Puskar / AP
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When announcing his retirement in 2011, the 85-year-old called the situation a "tragedy" and said, "I wish I had done more."
For context, story is in '76 JVP protected an obscure assistant coach no one had yet heard of, when JVP had 5 kids ages 4-14. It's bunk.— Scott Paterno (@ScottPaterno) May 6, 2016
Btw, the claims about '87 were around in 11/11, did not allege notice to JVP, and were widely dismissed. But, ya know, clicks and that.— Scott Paterno (@ScottPaterno) May 6, 2016
The Patriot-News of Harrisburg first obtained the order.
A lawyer for the Paterno family, Wick Sollers, issued a statement to PEOPLE saying the family is demanding a "full review of facts" regarding Paterno's alleged involvement.
"Because of a single sentence in a court record of an insurance case, Joe Paterno's reputation has once again been smeared with an unsubstantiated, forty year old allegation," the statement said. "Over the past four and a half years, numerous allegations that were taken as fact when they were initially communicated have been proven false."
Sollers declared to the Patriot-News: "Joe Paterno did not, at any time, cover up conduct by Jerry Sandusky."
Paterno's son, Scott, spoke out about the claim on Twitter rant early on Friday, calling the allegation "bunk."
"For context, story is in '76 JVP protected an obscure assistant coach no one had yet heard of, when JVP had 5 kids ages 4-14," he tweeted, referring to his father as "JVP."