Harvard Claims Marsh Is to Blame for Its Loss of $15M in Coverage for Admissions Fight

November 20, 2023 by

Having lost two bids to recover $15 million from its insurer to cover costs related to its failed defense of its admissions policy, Harvard University is now looking to hold its insurance broker, Marsh, responsible.

Harvard’s excess insurer Zurich American denied coverage for the high-profile litigation because it had not been timely notified of the case. When the university went to court to force Zurich to pay up, Harvard lost in federal district court in November 2022 and then again on appeal this past August. The courts found Zurich rightfully denied coverage because it did not receive timely notice of the litigation.

In a lawsuit filed in Suffolk Superior Court in Boston, the university now claims that the failure to file a timely notice of its claim with Zurich was malpractice on the part of Marsh.

Harvard in 2014 had purchased a one-year, $25 million educational errors and omissions (E&O) policy from AIG that covered litigation costs for claims brought against the university. The school also obtained a $15 million excess E&O policy from Zurich American to cover legal costs after the AIG policy was exhausted. Both policies required Harvard to report legal claims no later than 90 days after the end of the policy period. The policies covered Nov. 1, 2014, to Nov. 1, 2015.

The original lawsuit by Students for Fair Admissions (SFFA) culminated with a landmark ruling by the U.S. Supreme Court in June 2022 that found Harvard’s affirmative action admissions policy was unconstitutional. The SFFA lawsuit was filed Nov. 17, 2014. Harvard’s primary carrier — AIG’s National Union Fire Insurance — was immediately notified of the claim event but Zurich was not notified until May 2017, well after the 90-day notification window.

AIG paid what it owed as primary insurer but Zurich denied the excess coverage. Harvard sued Zurich over the denial but lost.

According to the state court complaint, Marsh was the broker responsible for the placement of the policies purchased from AIG and Zurich and, as its broker, Marsh undertook the contractual obligation to “prepare loss notices to insurers and notify insurers of claims.” Further, Marsh, as a licensed insurance brokerage, owed a duty to perform its duties in a “professional manner that accorded with the applicable standard of care,” according to the complaint.

Harvard is seeking damages from Marsh for alleged breach of contract and for “tortious violation of the professional standard of care” that it claims resulted in Harvard’s loss of access to its excess insurance coverage for the defense costs and other SFFA action-related expenses incurred in excess of the $27.5 million attachment point of Zurich’s excess policy.

According to the timeline provided by Harvard, on Nov. 18, 2014, Harvard sent an email to Marsh regarding the SFFA action requesting that Marsh report the matter to AIG and for Marsh to provide an analysis as to coverage for the claim.

Harvard says it did not discover Marsh’s failure to place Zurich on notice of the SFFA claim until May 2017. Marsh then formally reported it to Zurich and Harvard’s other excess E&O insurers. Zurich acknowledged receipt on May 25, 2017.

Harvard argues that the receipt of Harvard’s instruction to provide notice to even a single insurer triggered Marsh’s contractual and professional duties, both as set forth in the broker contract and as “inherent in a broker’s standard of care generally” to determine which insurers should receive notice of the claim and to then proceed with providing timely and adequate notice to all such insurers.

Harvard maintains that the inaction of Marsh was in contrast to that of another of its brokers, Risk Strategies Co., which the complaint says placed the entire tower of primary and excess general liability carriers for its policies with Harvard on notice of the SFFA action, “despite the absence of an initial explicit request from Harvard that it do so.”

According to the university’s complaint, Marsh has taken the position it was instructed by Harvard not to notify excess insurers. Harvard denies that it ever instructed Marsh not to notify excess insurers.

Furthermore, Harvard argues, if it is true that Marsh had been told not to report the claim to Zurich, that should have trigged other actions by Harvard to confirm that in writing and to advise Harvard of the risks of not notifying the excess insurers.

Marsh had no comment.

Harvard asserts it has incurred and continues to incur SFFA action-related defense costs, fees and expenses in amounts that have already or will soon exceed the Zurich policy’s attachment point. As a result of Zurich’s denial, Harvard has lost the ability to access the Zurich policy’s $15 million policy limit. Harvard says Zurich’s denial of coverage also caused it to incur legal expenses to assess options and ultimately to pursue Zurich for coverage.

In late May 2020, Harvard retained the legal services of Anderson Kill P.C. to evaluate the consequences of Marsh’s conduct and Zurich’s resulting denial of coverage.

The lawsuit was received by the Suffolk Superior Court on October 25. Harvard maintains the lawsuit is timely under a tolling agreement with Marsh that extended the period for filing claims.