September 20, 2021
A recent Law 360 story by Eli Flesch, “Harvard Sues Insurer For Legal Fees in Affirmative Action Suit,” reports that Harvard University sued Zurich American Insurance Co. for excess coverage of costs it incurred fighting a lawsuit challenging its affirmative action policies, saying the insurer wrongly denied coverage on the basis that it didn't get a timely notice of the suit. The Ivy League school told a Massachusetts federal court that Zurich was ducking its obligation under a $15 million excess insurance policy to pay for legal fees connected to allegations that it has engaged in illegal racial balancing to the detriment of Asian American applicants. Harvard defeated the underlying suit in two lower courts but still faces a government investigation and a potential U.S. Supreme Court fight.
In an 11-page complaint, one of Harvard's governing boards told the court that it had already maxed out its $25 million coverage limit under its policy with AIG unit National Union Fire Insurance Co. of Pittsburgh. The university said it would continue to accrue legal fees because of a pending U.S. Department of Justice inquiry and the writ of certiorari that could bring the Title VI allegations of discrimination to the Supreme Court.
Harvard said it provided notice to Zurich of its claim in May 2017, far before its coverage under the AIG policy had been exhausted. Despite that, the university said, Zurich denied its claim in October 2017 on the basis of "purported" late notice. The insurer told Harvard in several letters that it would have been entitled to coverage under the policy had timely notice been given, according to the complaint.
But Harvard argued that the Zurich policy, which carried much the same terms as the AIG policy, required the university to tender notice of the claim "as soon as practicable," which it did. Moreover, Zurich personnel were well aware of the discrimination suit, the university said, pointing out the considerable media attention drawn by the allegations. The university is seeking a declaration of coverage and a finding of breach of contract.
The underlying suit, brought by Students for Fair Admissions, claimed that Harvard violated Title VI of the Civil Rights Act. The group lost its case in 2018 after a closely watched three-week bench trial, a finding that the First Circuit upheld in November. In June, the U.S. Supreme Court signaled it might take up the landmark challenge to Harvard's affirmative action admissions policy when it invited President Joe Biden's administration to weigh in on whether the school's race-conscious system is legal.