The Road to Insurance Recovery

For several years now, Harvard has been at the center of highly publicized and contentious litigation arising from its race-conscious admissions practices that, according to the lawsuit, discriminate against Asian American applicants in violation of Title VI of the Civil Rights Act of 1964. Just days after the United States Supreme Court heard oral argument over Harvard’s admissions practices, a federal judge ruled that Harvard forfeited its right to $15 million in potential coverage for failing to timely notify an excess insurer of the claim.

Shortly after the admissions-practices lawsuit was filed in 2014, Harvard sought coverage under a $25 million primary policy issued by American International Group (“AIG”). Harvard had also purchased a $15 million excess policy from Zurich Insurance Group Ltd (“Zurich”).  After incurring more than $25 million in costs defending the admissions-practices case and exhausting the primary policy, Harvard turned to Zurich to cover the ongoing legal fees. However, Zurich refused on the basis that Harvard had failed to comply with the policy’s notice provision which required notice of a claim be given no later than January 30, 2016. The University did not give notice to Zurich until May 23, 2017—more than a year after the deadline.

In September 2021, Harvard sued Zurich in Massachusetts federal court claiming Zurich was obligated to cover Harvard’s underlying defense costs. See generally President and Fellows of Harvard College v. Zurich Am. Ins. Co., Case No. 1:21CV11530, 2022 WL 16639238 (D. Mass. Nov. 2, 2022). In response to the coverage lawsuit, Zurich moved for summary judgment asking the court to dismiss the action due to Harvard’s noncompliance with the policy’s notice requirements. Harvard opposed the motion by arguing that despite not formally giving notice to Zurich until after the notice deadline, Zurich was nonetheless aware of the admissions-practices lawsuit during the policy period as a result of the significant media attention the case garnered. The federal court disagreed and ruled that Zurich was excused from providing coverage due to Harvard’s late notice. In reaching its decision, the court found the notice provision in the Zurich policy was unambiguous, and, therefore, must be strictly enforced as written. Nor was the court persuaded by Harvard’s constructive notice argument, holding “Zurich’s lack of prejudice, or constructive, or even actual knowledge would not change Harvard’s obligation to provide notice in full compliance with the terms of the Policy.”

As was the case with Harvard, late notice issues often arise with respect to excess coverage when it seems unlikely that damages or costs will reach the excess insurer’s higher policy limits. Harvard’s coverage litigation serves to highlight the importance of policyholders knowing which policies are claims-made-and-reported and ensuring proper procedures are in place to timely notify insurers of potentially covered claims. When in doubt, provide notice. Waiting too long can cost policyholders millions.