For the second time in nine months, a federal court has ruled that Harvard is out the $15 million it sought from a legal insurer because it missed the deadline for notifying the company it would invoke the policy for excess bills related to its decade-long, and ultimately unsuccessful, court battle against a group that didn't like its affirmative-action policies.
Today's ruling, by the US Court of Appeals for the First Circuit in Boston upholds a ruling by a judge in US District Court last November to dismiss Harvard's suit against Zurich American Insurance.
Harvard actually had two insurance policies to cover lawsuit costs - a standard policy and then a separate policy with another insurer to reimburse it should its legal fees exceed the amount specified in the first policy.
In 2014, Harvard took out a one-year insurance policy with AIG to cover up to $25 million in litigation expenses - which Harvard says it racked up trying to fend off the affirmative-action suit. It then took out a separate policy for another $15 million in legal bills above that amount with Zurich. Both policies required Harvard to notify the insurers of any legal action for which the school might seek insurance payments within 90 days of the end of the insurance term.
But, oops, according to the Court of Appeals for the First Circuit's summary of the case:
On November 19, 2014 - in anticipation of the legal costs to come - Harvard notified AIG of the pending suit, thereby securing coverage under the primary policy. Harvard neglected, though, to notify Zurich of the suit until May 23, 2017 - well outside the excess policy's ninety-day notification window. Consequently, Zurich denied coverage under the excess policy on the ground that Harvard had failed to furnish timely notice.
Although the issue entirely involved Massachusetts insurance law, Harvard sued in Boston federal court, because it and Zurich are based in different states.
In its ruling today, the appeals court concluded that the federal judge last fall did not get Massachusetts insurance law wrong and so was right in dismissing Harvard's claim, because the law - and state court rulings on the law - are pretty clear that when it comes to insurance of the sort Harvard bought, the principal of you snooze, you lose applies.
The parties do not dispute that Harvard purchased a claims-made policy from Zurich. Nor do they dispute that Harvard failed to provide Zurich with written notice until May of 2017 - long after the deadline stipulated in the policy had passed. Consequently, Zurich had every right to deny coverage based on a lack of timely notice.
Harvard argued that Zurich did, too, know about the suit, even if Harvard didn't specifically notify it; after all, it received some extensive media coverage, but the appeals court called that "little more than gaslighting."
The court also admonished the university for the way it sued in federal, rather than state, court over an interpretation of state insurance law. Because of the "diversity" issue, that was Harvard's right, but it shouldn't have expected federal judges to reinterpret state laws in ways that would abrogate what state courts have consistently held:
Harvard - which could have sued in a Massachusetts court and argued for a modification of that state's substantive law - opted instead to avail itself of a federal forum. As we have admonished in earlier cases, a plaintiff "who made a deliberate choice to sue in federal court rather than in a [Massachusetts] state court is not in a position to ask us to blaze a new trail that the [Massachusetts] courts have not invited." Jones v. Secord, 684 F.3d 1, 11 (1st Cir. 2012).
With its legal arguments encountering strong headwinds, Harvard pivots. It contends that to enforce the notice requirement in Zurich's excess policy would contravene sound public policy. Opportunistic insurers would be incentivized, Harvard insists, to draft convoluted notice provisions in the hope of duping customers into defaulting on their coverage. Whatever the merits of this contention - and we take no position on it - it is for Massachusetts courts, not for a federal court, to weigh the policy implications of Massachusetts law.
The court also rejected Harvard's contention that the issue is one of great public import, one that demands a federal court step in. In fact, the court concluded, the case "implicates only garden-variety issues of state contract law, over which we are not an authoritative tribunal."