Even the smartest land institutions can miss deadlines — and could lose $15 million in insurance coverage because of it, a fedeal appeals court ruled Wednesday.
The US 1St The Circuit Court of Appeals upheld a lower court ruling that found that a Zurich American Insurance Co. subsidiary did not owe coverage to Harvard University in its long-running and high-profile affirmative action litigation. The reason? Harvard did not give notice to its insurer within 90 days of the end of the policy period, as required by the policy.
“Zurich has every right to deny coverage based on a lack of timely notice,” Circuit Judge Bruce Selya wrote for the panel of judges. Harvard’s arguments on its appeal are “lacking force” and “little amount to gaslighting,” the opinion said.
Harvard in 2014 purchased a one-year, $25 million liability policy from AIG unit National Union Fire Insurance, which covers litigation costs for claims brought against the university. The institution also obtained a $15 million excess policy from Zurich American, to cover legal costs after AIG’s policy ran out.
Both policies are claims-based, not event-based, and both require Harvard to report legal claims no later than 90 days after the end of the policy period. The policies cover Nov. 1, 2014 to Nov. 1, 2015.
The now major lawsuit that successfully challenged Harvard’s admissions policy, which culminated in a landmark US Supreme Court ruling in June, was filed on November 17, 2014. Harvard notified AIG but failed to notify Zurich until in May 2017, after 90 days. notification window, the appeals court explained.
Zurich denied coverage and Harvard sued. A federal district court in November 2022 ruled against the school, and Harvard appealed.
Harvard Zurich ruled
Lawyers for the university argued that even if Harvard had not given formal notice of the case, Zurich likely learned about it through news reports. The university is asking for discovery to show what Zurich officials knew about the case at the time. But the district court and appellate judges ruled against that motion, saying the information was irrelevant because the policy requires written notice.
Harvard also argued that Massachusetts law provides insureds with certain instances of late notices, as long as the late notice does not prejudice the insurer’s claim investigation. But the appeals court said deadlines are more important in claims-based policies, so that insurers can set premiums appropriately.
A claims-made policy covers claims made during the policy period, regardless of when the incident or action occurred, the court explained. The purpose is to minimize the time between the insured event and the payment. If a claim is made against an insured, but the insurer does not know about it until years later, the main purpose of insuring claims instead of events is defeated, the court said -says, citing a decision of the Supreme Court of the Supreme Court of Massachusetts, Charles T. Main. compared to Firemen’s Fund Insurance.
“Not all liability insurance policies are on a level playing field, and the ‘no harm, no harm’ principle does not apply to failures to provide timely written notice under claims-made insurance. policies,” said 1St The Circuit’s opinion in the Harvard case. “In Massachusetts, notice provisions in claims-made policies — requiring that notice of a claim be given at the end of the policy period or a specified period ending shortly thereafter — are the essence of the policies. These provisions are intended not only to facilitate an investigation of the facts underlying a claim but also – just as importantly – to promote fairness in rate setting.
In a landmark decision, the Supreme Court, by a 6-3 vote, in June eliminated the use of race as a factor in deciding which students are granted college admissions. The case, Students for Fair Admissions vs. Harvard, essentially ended the affirmative action program and now has a widespread effect on college admissions.
Harvard may have little trouble paying the legal costs, some have suggested. The university’s endowment from donors was worth $53 billion in 2021, the largest in the country, according to US News & World Report. Zurich American Insurance Group, meanwhile, is also well capitalized, with $6.5 billion in revenue by 2022, the group reported.
Top photo: An entrance to Harvard. (AP Photo/Michael Casey)
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