Author Mortenson, Charity Sue Insurer Over Defense Costs for Montana Probe

“Three Cups of Tea” co-author Greg Mortenson and his charity are suing their insurer to cover the cost of defending their legal woes of the past 18 months.

Mortenson and the Central Asia Institute say in their federal lawsuit that Philadelphia Indemnity Insurance Co. should pay for the attorney fees amassed in defending a separate lawsuit alleging Mortenson fraudulently fabricated parts of his memoir on how he started building schools in Pakistan.

Mortenson and the charity also are seeking full coverage of the costs to defend a Montana attorney general’s probe into how CAI was run and whether Mortenson benefited from it.

The lawsuit does not say how much Mortenson and CAI are seeking, just that it is more than $75,000. The complaint says Philadelphia offered to reimburse CAI 33 percent and Mortenson 15 percent of their respective defense fees in the civil lawsuit.

For the state investigation, the insurer offered to reimburse 50 percent of Mortenson’s defense fees and all the fees CAI incurred.

Attorneys for Mortenson and CAI say Philadelphia is obligated to pay for their defense costs under their insurance policy. They also allege the insurer acted in bad faith and its misrepresentations of the policy amount to unfair trade practices.

The insurance company denied that and said in documents that certain allegations against Mortenson don’t fall within the policy. The company says that includes the publication of material that the insured person or company knows is false.

CAI interim executive director Anne Beyersdorfer referred questions to attorney Carey Matovich, who said she could not comment on pending litigation.

Mortenson, his books and the Central Asia Institute came under scrutiny last year when reports by “60 Minutes” and author Jon Krakauer alleged that Mortenson fabricated parts of “Three Cups of Tea” and its sequel “Stones Into Schools” and that he benefited financially from the charity.

The attorney general’s probe focused only on the charity’s finances and operations, and did not examine the books’ contents. Four people who bought Mortenson’s books sued, alleging the fabrications amounted to fraud.

Mortenson has previously denied lying in the books, though he acknowledged compressing some of the events that happened over different periods of time.

U.S. District Judge Sam Haddon dismissed the lawsuit earlier this year, and the plaintiffs have appealed to the 9th U.S. Circuit Court of Appeals.

The attorney general investigation concluded last spring that Mortenson’s control of the institute went unchallenged by the charity’s board of directors and led to the charity spending millions on Mortenson’s books, travel and personal items.

The settlement called for Mortenson to reimburse the charity nearly $1 million, his removal from a position of financial oversight and an expansion of the board.