Judge Rules Against Harvard in Case on Fumbled Insurance Filing

https://www.nytimes.com/2022/11/02/us/harvard-insurance-affirmative-action.html

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WASHINGTON — Harvard’s failure to tell an insurance company that it had been sued over its race-conscious admissions program means that it cannot use a $15 million policy to cover its legal expenses, a federal judge in Boston ruled on Wednesday.

Acting two days after Harvard faced skeptical questions at the Supreme Court about its admissions practices, Judge Allison D. Burroughs of the Federal District Court in Boston ruled that “an unambiguous insurance policy must be applied as written.”

She said it was undisputed that Harvard had failed to file a timely formal claim with one of its insurance companies, Zurich American Insurance. It did not matter, she wrote, that Zurich may have learned about the affirmative action suit informally.

Days after Students for Fair Admissions sued Harvard in 2014, arguing that its practice of taking account of race in its undergraduate admissions decisions was unlawful and harmed Asian American applicants, the university formally notified its primary insurance carrier to seek payment of its defense costs. That policy had a $25 million limit, after Harvard paid $2.5 million.

But Harvard did not alert Zurich, its excess insurer, which was meant to cover the next $15 million, until long after the policy’s deadline had passed.

Zurich refused to pay, and Harvard sued. In the process, the university disclosed that its legal fees and expenses in the admissions lawsuit and a related Justice Department investigation had topped $27 million.

Both of Harvard’s insurance policies covered claims made against it during the one-year period ending in November 2015, so long as they were reported to the insurers by January 2016. The Zurich policy said that notice to the primary insurer did not suffice.

Harvard did not provide formal notice to Zurich until May 2017, more than a year after the deadline.

In court papers, lawyers for Zurich said the case was straightforward. “Harvard’s admitted failure to comply with the notice provision,” they wrote, “is fatal to its claim for coverage.”

In response, Harvard’s lawyers argued that Zurich “surely knew” about the affirmative action suit “in the year after it was filed, especially given the significant, ongoing attention that the suit received in national and local news” and Zurich’s own underwriting activities.

They added: “The notice requirement is not an escape hatch for insurance companies to avoid liability to policyholders due to technical noncompliance.”

Zurich’s lawyers said that argument was “creative yet specious” and “outlandish.”