Missed deadline means insurer won't have to cover Harvard's litigation costs in admissions challenge

A federal judge rejected claims from Harvard College that Zurich American Insurance Co. is on the hook to cover part of the costs the school incurred in defending against a lawsuit challenging its affirmative action admissions policies, a case heard by the U.S. Supreme Court last week.

In an order dated Nov. 2, U.S. District Judge Allison Burroughs of the District of Massachusetts granted summary judgment to Zurich and dismissed the case, concluding that Harvard didn’t formally notify the company about the lawsuit targeting the school’s admissions policies until May 2017, after a notification deadline laid out in the “claims-made-and-reported” policy had passed. The missed deadline could cost Harvard up to $15 million.

Harvard argued that Zurich should have known about the lawsuit given the media coverage it garnered and said the school didn’t need to notify the insurer. But Burroughs didn’t accept that argument.

“Massachusetts law is clear that the unambiguous terms of an insurance policy must be strictly enforced and an insured’s failure to comply with the notice provision of a claims made policy bars coverage,” she wrote. “Prejudice and actual or constructive knowledge are not exceptions to the general rule.”

Harvard did not immediately return a request for comment.

The dispute stems from a lawsuit brought against Harvard in 2014 by the group Students For Fair Admissions, alleging that the school’s race-conscious admissions policy discriminates against Asian American applicants.

Earlier this week, the justices heard arguments from the group asking that the court overrule a 2003 decision that upheld the use of race as a factor in a holistic review of student applicants. Seth Waxman, partner at Wilmer Cutler Pickering Hale and Dorr, faced skeptical questions from the court’s conservative justices in defending Harvard’s admissions process. Consovoy McCarthy partner Cameron Norris represented the SFFA.

The justices also heard a similar challenge to admissions policies at the University of North Carolina.

In its complaint against Zurich, Harvard said costs incurred from the SFFA lawsuit were covered under an AIG subsidiary’s policy that had a limit of $25 million and a deductible of $2.5 million. The school said defense costs that exceeded the limit under that policy were then to be covered under a Zurich policy with a liability limit of $15 million, but the insurer denied coverage because it didn’t receive timely notice from Harvard of SFFA’s claims.

Harvard didn’t specify how much it has incurred in defense costs over the course of the litigation, but in a filing in September, said the costs exceed the $25 million cap under the AIG subsidiary’s primary policy and are “within the limits of Zurich’s excess insurance policy.”

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