In 2014, Harvard purchased a one-year liability insurance police from the American International Group, Inc. (AIG). The policy covered litigation costs in the event a claim was brought against Harvard, as well as the liabilities resulting from a judgment or settlement, up to $25 million. The policy included “claims-made coverage,” meaning Harvard was required to provide prompt written notice of any claim filed against them.
In addition to the AIG policy, Harvard purchased a secondary policy from Zurich American Insurance Company (Zurich) to insure against an additional $15 million in costs should a claim exhaust the AIG coverage. The Zurich policy also required prompt written notice of any claims, in the same manner as the AIG policy.
Under both policies, Harvard had to report the claims within 90 days of the end of the policy period. The policies provided coverage from November 1, 2014 to November 1, 2015, so any claim against Harvard had to be reported no later than January 30, 2016.
On November 17, 2014, the Students for Fair Admissions sued Harvard for unfair admissions practices, which culminated in the recent affirmative action decision by the Supreme Court. On November 19, 2014, in anticipation of the legal costs, Harvard notified AIG of the pending suit, securing coverage under the primary policy. Harvard did not notify Zurich of the suit until May 23, 2017. Zurich denied coverage under the excess policy due to failure to furnish timely notice.
Harvard sued Zurich, seeking damages for breach of contract. Zurich argued that Harvard forfeited any entitlement to coverage. The trial court ruled in favor of Zurich and Harvard appealed.
On appeal, Harvard argued that the trial court misapplied the law by requiring strict compliance with the notice requirement. The Court of Appeals was not persuaded. The Court looked at the plain language of the insurance policy. Harvard purchased a claims-made policy from Zurich, and failed to provide notice until long after the deadline stipulated had passed. Therefore, Zurich had every right to deny coverage based on a lack of timely notice.
The Court of Appeals also considered the practical importance of timely notice, which allows the insurance company to promote fairness in setting its rates. Harvard had the responsibility to understand the type of coverage it purchased, and the Court of Appeals was not willing to rewrite the policy or Massachusetts law to conform to Harvard’s expectations.
President & Fellows of Harvard Coll. v. Zurich Am. Ins. Co. (1st Cir. 2023) 77 F.4th 33.
Note: This case is an important reminder that nonprofit employers need to tender claims to their insurance companies in a timely manner, especially when they have multiple insurance policies, in order to ensure coverage. In this case, the impact on Harvard was several million dollars’ worth of lost coverage.