Excess or umbrella insurance is an essential risk mitigation component for any successful business. Whether the nature of your business’s operations, the potential for catastrophic loss or the threat of frequent litigation, excess or umbrella insurance can provide a business with the protection it needs to assure that large losses or frequent litigation do not threaten the business itself or the livelihoods of its owners, officers, or employees.
When losses or claims do occur, many different types of liability policies have certain time requirements that can become a trap for the unwary. Further, even when notice is given, depending on the circumstances of the claim and the nature of the policy, additional notices or updates may be required. One example could be a general liability policy with a large retention. The insured could be required to provide notice within some time frame of the claim itself and, later, a further notice that it has satisfied (or is near satisfying) the retention, as the case may be. Policy language can vary widely with respect to notice requirements. A case involving Harvard University illustrates the problem.
Harvard University has a storied history when it comes to affirmative action. In late 2014, a group of students challenged the university’s admission procedures, resulting in a case that’s been winding its way through the courts.
As a result of the litigation, the school has spent a significant amount of money in the defense of these claims, which Harvard attempted to recover under a few different insurance policies. The school’s primary educational institution risk policy was with AIG when the suit was filed, and it had an excess policy with Zurich American Insurance Company during the same time-period, which was 2014 to 2015.
Question over notice of the lawsuit
As noted above, the suit was filed against the school in 2014, during the period when both AIG and Zurich were insuring the school. The policy with AIG had a $25 million coverage limit, which Harvard contends it is exhausting because of the high costs of defending the litigation. It is seeking to recover the $15 million in excess coverage limits from Zurich under the excess policy.
Zurich contends that the school did not provide notice to it until 2017. The insurer believes that the late notice of the suit removes their obligation to provide any coverage in the affirmative action lawsuit. The insurance contract had terms which stated that notice was to be given to the insurer “as soon as practicable” – and the school feels that they did in fact provide that notice in a timely manner. Additionally, Harvard believes that the insurance company knew about the lawsuit, as well as its defense obligations, long before the school reached out.
The insurance coverage dispute is in its very early stages in the U.S. District Court for the District of Massachusetts, so it remains to be seen how this specific issue will be decided. The underlying affirmative action litigation is before the United States Supreme Court and has been scheduled for argument at the end of October.
However the insurance coverage dispute might be resolved, the case itself illustrates the importance of putting all potentially applicable policies on notice. While a claim might initially seem unlikely to implicate an excess policy, oftentimes it may be appropriate to put the excess carrier on notice if for no other reason than to avoid the very kinds of disputes like those apparently at issue in the Harvard case.
Should you have questions about your insurance coverage, or your obligations under an insurance policy, we invite you to reach out to our firm to learn more about your options. We can explain what we can do to help you take the appropriate action in your case.