Harvard University today sued its insurance broker, which it says is to blame for the failure to notify one of its legal insurers in time to get reimbursed for all the legal help it needed in a nine-year, ultimately unsuccessful, effort to fend off a lawsuit - and still ongoing federal investigation - involving its affirmative-action policies for student admissions.
In a lawsuit filed in Suffolk Superior Court, the school blames Marsh, USA, Inc., a New York insurance brokerage and risk-management company with an office in downtown Boston, for missing a deadline - by nearly three years - to notify one of its legal insurers about the lawsuit and investigation, which meant the insurers refused to reimburse Harvard for its legal expenses.
Harvard actually had two legal insurance policies, one to cover it for up to $25 million in costs for legal expenses above a $2.7-million deductible and then a second, for $15 million, to cover any expenses from long, protracted cases that wound up costing it more than $27.5 million - such as the affirmative-action case, which lost at the Supreme Court earlier this year after some nine years fighting it in federal court in Boston, and the Justice Department investigation, which Harvard says has meant filing more than 100,000 pages of documentation.
In its complaint, Harvard says Marsh properly notified its main insurer, AIG, on time about the suit, and so Harvard got reimbursed for that portion of its expenses. But the excess-cost insurer, Zurich American Insurance, refused to pay out anything, saying its contract with Harvard required the school to notify it of any potentially expensive cases within three months of them being filed, but Harvard did not notify it of the case until three years after its filing.
Harvard sued Zurich in federal court in Boston, lost in November, appealed, then lost again, with the US Court of Appeals concluding Harvard blew it because it should have paid attention to the terms of its contract.
In today's suit, Harvard says Marsh handled all of its communications with the two insurers and that it told the company the day after it was sued in November, 2014 to alert the first company. Harvard alleges this should have meant formally communicating news of the suit to not just AIG but to Zurich, because the Zurich policy was effectively a continuation of the AIG one.
Yet despite "numerous communications" between Harvard and Marsh's Boston office in the days and weeks after the suit was filed, Marsh never told Zurich - and never alerted Harvard that it would need to contact Zurch, the suit claims, adding that by the spring of 2015, Harvard told Marsh the suit was particularly complex and could very possibly exhaust the $25-million AIG policy.
Finally, in May, 2017, Harvard asked Marsh, "out of an abundance of caution, to inquire if an update should be given to Zurich about the [lawsuit]." The suit alleges it was only then Marsh said it had never contacted Zurich.
By the time Harvard became aware of Marsh's error and omission, the deadline for providing timely notice to Zurich had long passed, and it was to late to cure the late notice.
Sure enough, in October of that year, Zurich denied Harvard's claim, because it had waited too long to file it.
In addition to the costs of defending the lawsuit above what AIG paid, Harvard is seeking reimbursement for all the extra legal costs of unsuccessfully suing Zurich, plus enough damages and attorneys' fees and a declaration that Marsh committed professional malpractice.
It was only then that Marsh disclosed it had not yet reported [the lawsuit] to Zurich.