It's always horrible when something like this happens - and, unfortunately, it's not limited to martial arts, or even to sports.
Some years ago, I was talking to the orchestra teacher at the school where I teach special education, and we started talking about things we do in our off time - so of course the TKD came up. One of the comments he made was that part of why he was retiring instead of teaching a few more years was because he was afraid to touch his students - in the context of things like standing behind a student seated in a chair, and reaching his arms around to adjust the position of violin and/or bow.
He then asked me how I avoided difficulties with touching in instructing TKD, and I told him that I never touched a student of either gender, adult or child, without someone else present - preferably several someone elses. Like Ceicei's class, my class is open - the door is closed because we are in a racquetball court converted to a dance studio, but the overlook from when it was a racquetball court (the area above the court where observers could watch the game without getting hit by a ball) is still there, and parents and/or spouses often sit up there, people getting YMCA tours come and watch the class, racquetball players walk past to the remaining courts, and so on (the racquetball players are why the door is shut; they're very noisy, and they often swear... which I'd rather not hear).
In addition, when I grab students to adjust their body position, I grab their belt - not their body. Students who need help with their belts and/or dobok top are helped by someone of the same gender, usually in the locker room.
Thankfully, I have never had a problem with this issue in my class - and I intend to keep it this way.
I do think, however, that caution can go too far the other direction. A man I knew when we were both in the same teacher training program told me that he had been interning at the same school his then 6 year-old daughter attended, when she fell down and scraped her knee. She came running to him, and he hugged her, cleaned her up, kissed her forehead, and sent her on her way... and was later chewed out for it, because (as he was told) there was no reason for any adult working in a school to touch a child at all, except for things like cleaning the scraped knee, for which she should have been sent to the health aide. He was excused because she was his daughter, but told to be sure it never happened again, with her or any other child - because if other children saw him treat his daughter that they might want similar treatment in similar circumstances, and another child might misconstrue (or a parent might) and get him into real trouble.