Harvard, Zurich Insurance at Odds over $15M Coverage for Admissions Program Defense

Harvard University has already exhausted $25 million in insurance coverage defending its affirmative action admissions program and is in court trying to force another of its insurers to cover up to $15 million more.

While the $25 million costs to date have been covered under an American International Group subsidiary’s (National Union Fire Insurance Co.) primary liability policy, the university wants its $15 million excess insurance policy issued by Zurich Insurance to cover costs above that amount. But Zurich maintains Harvard missed the deadline for notifying it of its claim

The university has been defending its admissions policy against a lawsuit brought by Students for Fair Admissions filed in 2014 and a Department of Justice investigation launched in 2017. Both the primary and excess policies covered claims made during the year ended November 2015 provided Harvard notified the insurers by January 2016.

Harvard said its defense costs consist of legal fees and expenses, costs associated with electronic discovery vendors, expert witness fees and court costs. These costs have exceeded the AIG policy limits and retention/deductible. The school said it has incurred and will continue to accrue defense costs for these matters because the SFFA action is now the subject of a writ of certiorari in the U.S. Supreme Court and the DOJ Investigation is still pending.

According to court filings, AIG has treated the SFFA action and the DOJ investigation as a single claim and covered the defense costs incurred subject to a single retention/deductible.

Zurich has declined coverage, claiming that Harvard did not give it timely written notice of the SFFA claim. Notice to the primary insurer does not satisfy its notice requirement, the insurer insists.

However, Harvard argues that, while it did not formally notify Zurich of the SFFA action until May 2017, it believes that Zurich had “actual or constructive knowledge” of the SFFA action in late 2014 or early 2015, and in any event no later than January 30, 2016. Harvard contends that Zurich had notice by virtue of widespread media coverage of the SFFA action including by CNN and Fox News, as well as The New York Times, The Wall Street Journal, The Boston Globe, Bloomberg, USA Today, The Associated Press and The Washington Post.

Harvard further claims Zurich was given notice through the attendance by Zurich personnel assigned to its account at meetings where the SFFA action was discussed.

Harvard argues that the Zurich policy follows the AIG policy, which requires written notice “as soon as practicable,” and that it formally notified Zurich well before its costs exceeded the AIG policy. “Formal notice of the SFFA Action was given to Zurich as soon as practicable, given the attachment point of the Zurich Policy and the state of the SFFA Action and its defense at or about the time that formal notice was provided,” Harvard states.

Harvard claims that when it provided formal notice to Zurich, the AIG policy limit amount was “far from being exhausted” and its defense costs “were not even close to the attachment point” of the Zurich policy. Also, the university notes, AIG as the primary insurance company was actively participating in the defense of the underlying claim.

Harvard seeks damages from Zurich for breach of contract and a declaration that Zurich must reimburse Harvard for all reasonable defense costs incurred and which will be incurred in excess of the AIG policy and retention/deductible.

The dispute over the excess coverage is before federal court in Massachusetts.

Harvard is also asking the court to compel Zurich to grant it access to personnel, emails and documents related to the SFFA action and its insurance account, including underwriting and setting of insurance rates.

The SFFA has contended that Harvard College’s student admissions program uses race in a way that violates Title VI civil rights act and unfairly discriminates against Asian American applicants. Harvard said the SFFA action required it to engage in “extensive” pre-trial discovery and motion practice.

The trial was conducted over a three-week period. Harvard succeeded in winning judgment on all counts. SFFA appealed to the U.S. Court of Appeals for the First Circuit, which in November 2020 ruled in favor of Harvard and upheld the district court’s decision.