by William A. Jacobson at legalinsurrection.com
What is happening here? First it was Oberlin College, now Harvard, where I’m rooting for insurance companies. First Circuit Court of Appeals finds Harvard failed to comply with claims notice requirement of insurance policy, and its main argument was “little more than gaslighting.”
Oh man, if this keeps up, I might stop hating insurance companies. The enemy of my enemy is my friend.
First, we find out insurance companies are refusing to reimburse Oberlin College for the $36 million it had to pay Gibson’s Bakery,Oberlin College Sues Insurers For Refusing To Cover $36 Million It Paid Gibson’s Bakery For Defamation And Other Torts (Update)
Now, the First Circuit just rejected a $15 million insurance claim by Harvard University against its insurance company for legal fees incurred in defending the Students For Fair Admissions case that ended up with a sweeping defeat for Harvard (and win for equality and equal protection) in the Supreme Court.
From the Opinion in Harvard University v. Zurich American Insurance Co.:
With $15,000,000 in coverage at stake, this case requires us to apply Massachusetts law to determine the effect of a failure to give notice as specified in an excess insurance policy affording coverage on a “claims made and reported” basis. Where, as here, a federal court sits in diversity jurisdiction, tasked with following state law, it is not free to innovate but, rather, must apply state substantive rules of decision as those rules have been articulated by the state’s highest tribunal….
In this instance, the Massachusetts Supreme Judicial Court (SJC) has spoken directly to the critical issue…. Staying within the borders of this well-beaten path, we hold that the failure to give notice according to the policy’s terms and conditions forfeits any right to coverage. Consequently, we affirm the district court’s entry of summary judgment in favor of the insurer….
On November 17, 2014, an organization known as Students for Fair Admissions sued Harvard in federal court for violating Title VI of the Civil Rights Act of 1964. What followed was a legal odyssey that spanned nearly a decade and culminated in proceedings before the Supreme Court….
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….
In Massachusetts, notice provisions of claims-made policies — which require that notice of a claim be given by the end of the policy period or a defined period ending shortly thereafter — are of the essence of those policies…. Under Massachusetts law, then, an insurer is not required to show prejudice before denying coverage due to an insured’s failure to comply with the notice requirement of a claims-made policy….
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.
Seemed pretty open and shut. Harvard screwed up. But wait, Harvard thought it could talk its way out of its own blunder, but the court was having none of it, accusing Harvard of “gaslighting” (emphasis added):
In Harvard’s view, the SJC’s holding in Chas. T. Main does not apply to circumstances in which an insurer has actual notice of a claim and can use that information to set its rates, notwithstanding the insured’s failure to comply with the policy’s notice requirement. But this is little more than gaslighting. Arguing that the policy’s notice requirement should not be enforced because Zurich may have had actual notice of the claim is simply another way of arguing that Zurich was not prejudiced by the lack of timely written notice. To honor such an argument would impermissibly collapse the critical distinction that the SJC has made between occurrence-based and claims-made policies.
The Court then went on to reject other Harvard attempt to squirm out of it’s predicament, such as the asserting raised (improperly) for the first time on appeal that the notification provisions of the policy were ambiguous or that this was such an extraordinary case of such great public importance that the normal rules should not apply.read more