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Harvard says it's spent more than $25 million defending against admissions suit; sues lawsuit insurer that won't cover some of the costs

Harvard University has one insurance policy to protect it against the costs of lawsuits and a second policy to protect it if its costs exceed those of the first policy.

In its own lawsuit against one of its insurers, Harvard is seeking to get reimbursed for the "excess" costs of defending itself against an admissions lawsuit that the Supreme Court is currently deciding to whether to consider. Harvard said it has gone past the $25 million limit of its first policy, but that its second, "excess insurance" insurer, Zurich American Insurance Company, is refusing to pay for the rest.

At issue is Harvard's defense against a group called Students for Fair Admissions, which first sued Harvard in 2014 claiming its admissions policies discriminate against Asian-Americans even though it was founded by three White people.

A federal judge in Boston dismissed the case, the group appealed and the US Court of Appeals for the First Circuit also rejected the case, saying that Harvard's admission policies, in which an applicant's race can be considered as one of many criteria, was not a discriminatory quota. However, the appeals court found that the group did have "standing" to bring the suit, which led to its current appeal to the Supreme Court. The group says it has since expanded its membership to include actual Asian-Americans

Also, the Department of Justice has not dropped an investigation, begun in 2017 under the Trump administration, into Harvard's admissions policies, which has led to further legal costs, the university says.

In its lawsuit against Zurich, filed this week in US District Court in Boston, Harvard said it has gone through the $25-million lawsuit-coverage policy it had with AIG - which included a $2.5-million deductible and so turned to the $15-million "Excess Select Insurance Policy" it had purchased from Zurich to cover it should its AIG policy be exhausted, which the school says it was.

Harvard says Zurich denied its claim on the grounds that Harvard didn't notify Zurich when it should have about the excess costs and so it doesn't owe the school anything. In its complaint, Harvard basically says: Seriously?

Without even getting into the whole issue of whether the nation's oldest institution of higher learning could possibly forget to notify an insurer about something like this, Harvard adds it would be hard for Zurich to not be aware of what was going on:

The SFFA Action was the topic of contemporaneous reports and written pieces in numerous national news media, including CNN and Fox News, as well as publications such as The New York Times, The Wall Street Journal, The Boston Globe, Bloomberg, USA Today, The Associated Press and The Washington Post. ...

Upon information and belief, Zurich had knowledge of the SFFA Action by late 2014 or early 2015, and no later than January 30, 2016.

In fact, if we're talking about formal invitations, Harvard continues:

Harvard provided Zurich formal notice of the SFFA Action in or around May 2017.

The complaint says AIG certainly knew about the suit and reimbursed Harvard for its costs related to the suit and federal investigation up to $25 million, less that $2.5 million deductible and that Harvard's policy with Zurich was essentially identical to AIG's.

As such, 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 university continues:

Harvard has incurred legal fees and expenses, costs paid to electronic discovery vendors, expert witness fees and court costs in excess of the policy limits under the AIG Policy and retention/deductible.

Harvard adds it has also had to dig up thousands of documents to provide to the Justice Department for its probe.

Harvard did not specify how much it is seeking from Zurich, save that it is more than $75,000 - the minimum amount required to bring a lawsuit of this nature in federal court. It is also seeking attorney's fees, court costs, interest and "other and further relief as the Court may deem just and proper."

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Comments

Nothing more American than this.

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Voting closed 25

How many if the lawyers are Asians?

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Voting closed 16

The interesting quirk to me is that SFFA, like the Project on Fair Representation, is just one guy, Ed Blum. There have been a few articles and exposes on him over the years. He's an ex-stockbroker who lost some sort of Congressional race in Texas decades ago to an African-American candidate and since that time has been fighting civil rights legislation and policies, usually with the help of dark money funding sources like Donors Trust and law firms set up by conservative political aides and ex-Reagan officials. Blum is not a lawyer. He's a professional anti-civil rights agitator looking for, what's the term? "economically anxious" would-be plaintiffs to challenge the ability of minorities to fully participate in society. Blum, d.b.a. as his one-person outfits SFFA and PFR, is behind this litigation, the endless Fisher v. Texas litigation, and the atrocious Shelby County battle that opened the floodgates for all the nakedly prejudicial voting restrictions we are seeing across Republican strongholds.

So for me the question is: what are Blum's finances like? How (and who) is underwriting him and his organizations? Are his non-profit organizations' finances improperly tied up in his own? If I were Harvard's general counsel I might just recommend spending a few dollars to do some digging and maybe turn the heat up on this guy.

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Voting closed 15

...is a rounding error for Harvard.

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Voting closed 15

$25 million in lost revenue as a result of a compromised reputation to just sell the (expletive) degree programs to more customers?

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Voting closed 9

You really think Harvard is having difficulty recruiting students and faculty?

The $25M for the freedom to set their own admission criteria is worth it to them. Becides, they've got billions in the bank. This lawsuit isn't about survival, it's basic breach of contract. Harvard wants what they paid for.

This tactic is pretty common - an insurer sees a huge liability and they roll the dice hoping the client won't fight a denied claim. It will get settled out of court.

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Voting closed 28

Someone thought Harvard wouldn't fight a denied insurance claim? Can I have their job? I'll do it for cheaper and far less stupidly.

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Voting closed 15

or maybe they know H-town would fight it, but an out-of-court settlement might be for less than the full $25M.

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Voting closed 11

Well, less that deductible they agreed to. At issue are their expenses above $25 million, for which they had a second insurance policy.

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Voting closed 11

To speculate: These insurance contracts are often written with gotcha type requirements to give the insurer a way to reject claims. Harvard may have been required (and omitted) to send a certified letter informing the insurer they planned to utilize the policy.

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Voting closed 10

but, a bit of thinking might help you realize that there's a bit more to offering a degree program (particularly one at a residential college!) to more students than just saying "ok, door's open".

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Voting closed 12

That it's an overpriced con.

What's your objective in simping for Harvard?

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Voting closed 8

But they should do it to more people!

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Voting closed 15

The food is awful, and the portions are too small!

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Voting closed 10

that during a housing crisis, suggesting that a school that houses 98% of its undergraduates should just accept more students may be ignoring some pretty relevant details.

But I guess actually thinking about reality would make it hard to be snarky about how everyone else is an idiot.

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Voting closed 9

It's good they've had to put their skin in the game.

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Voting closed 11

Harvard will do what all successful corporations and governments do, they'll pass the costs on to their consumers.

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Voting closed 7

They can surely afford to self-insure. Why do they bother with this bulls*it?

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Voting closed 9

I'm not really sure what the complaint is here - we're not exactly talking about slashing the English department budget or forcing student computer labs to use 1990s Dells or something that might actually affect their stated mission. Should companies or institutions with lots of available capital be forced to always spend the most money possible at any occasion, or can we concede that it makes sense to spend money on insurance to cover unusual expenses like this?

Besides, if the insurance companies didn't think it would be worth it, they wouldn't offer the policy to companies like Harvard.

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Voting closed 16

Relatively little of their endowment is unrestricted, you'll find. If Donor X gives $20 million for financial aid and Harvard uses it for litigation costs, well, they'll need some more money for litigation costs 'cuz that donor would have a legitimate cause of action against them. Without bothering to check their 990s I'd say that maybe, at most, 20% of their endowment is unrestricted - which still isn't saying "money sitting by idle waiting for someone to use it." It's tied up in investments, many of which are illiquid, and the predicted income from those investments is already accounted for in next year's operational budget somewhere. That's just how it works.

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Voting closed 12

They can surely afford to self-insure. Why do they bother with this bulls*it?

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Voting closed 7