A headline-grabbing case regarding race in the college admissions process at an elite university, appealed all the way to the United States Supreme Court, is the type of nightmare scenario that might inspire an educational institution to secure a solid excess insurance policy lest the underlying liability policy’s limits evaporate in the face of snowballing legal fees. Faced with exactly this scenario, Harvard College recently learned the hard way that the high-profile nature of such a case does not satisfy the notice requirement of a claims-made excess insurance policy, where the policy requires the insured to provide written notice of a claim within a specified period of time.

Having exceeded the $25 million limits of its educational institution liability policy, Harvard filed suit seeking coverage from Zurich American Insurance Company (“Zurich”) for the fees it incurred defending an underlying lawsuit filed in November 2014. On November 2, 2022, Judge Allison Burroughs of the United States District Court for the District of Massachusetts granted summary judgment in favor of Zurich. The basis for this decision was that while Harvard gave timely notice to its primary liability insurer, it first gave written notice of the claim to Zurich on May 23, 2017. By its terms the Zurich policy only covered claims that were made during the policy period of November 1, 2014, through November 1, 2015 and reported to the insurer within 90 days of the period’s end. The 2017 notice was more than a year late. The court rejected Harvard’s argument that constructive or actual notice of the well-publicized claim was sufficient to satisfy the policy’s notice requirement.

This decision underscores a critical difference between occurrence and claims-made insurance policies. An occurrence policy insures any covered “occurrence” (typically an “accident” damaging property or injuring a third party) that happens during a policy period. These typically are auto or comprehensive general liability (“CGL”) policies. A claims-made policy covers a claim (rather than the underlying event) that is made during a policy period. The latter types of policies typically involve professional or employment liability claims. Given the different triggers for coverage, the policies contain different notice requirements. With respect to an occurrence, a policy typically requires an insured to provide notice to an insurer as soon as “practicable,” so that the insurer can appropriately investigate and assess liability and mount an effective defense. A claims-made policy, in contrast, requires as a condition of coverage that notice be provided within the same policy period (or any extended reporting period) in which a claim is made.

In line with other jurisdictions, Massachusetts courts have appropriately distinguished how they handle coverage disputes arising from these two types of notice requirements. An insurer has the burden of showing it was substantially prejudiced by late notice where the notice requirement is found in an occurrence policy. But a policy term mandating that an insured provide its insurer with notice of a claim within the policy period or extended reporting period of a claims-made policy is not subject to a similar prejudice requirement. This distinction is long-standing, well-settled law to the extent that it is surprising that Harvard failed to meet its notice obligations in this case, and it is unsurprising that its argument that it be excused from the notice requirement was rejected by the court.

Harvard attempted to avoid clear precedent by relying on the unique nature of the underlying case. The suit giving rise to the coverage dispute generally alleged that Harvard’s admission policies (specifically, the way it handled the racial background of applicants), violated Title VI of the Civil Rights Act of 1964. This lawsuit was widely reported across the nation, and a related investigation opened by the United States Department of Justice in 2017 added to the matter’s notoriety. Harvard argued that this widespread media coverage gave Zurich constructive notice of the claim well before it received Harvard’s written notice. Furthermore, Harvard pointed to certain underwriting file materials indicating Zurich’s actual knowledge of the claim.

Judge Burroughs made short work of Harvard’s arguments, noting the strict terms of the policy’s notice requirements, which specified who must give notice (the insured), how notice must be given (in writing), the timing (within 90 days of the end of the policy period in which the claim was made), the form, and the recipient address of that notice. There was no ambiguity in such directions and the court accordingly did not grant Harvard any “wiggle room” in avoiding the policy’s strict terms due to the public nature of the case.[1]

Harvard’s inability to access upwards of an additional $15 million in excess coverage in this case is a sharp reminder to insureds under claims-made policies to take swift action any time they are sued, either via complaint or counterclaim. With the guidance of a broker or counsel, the insured in those circumstances should immediately consider what insurance might potentially cover defense or indemnity for the claim, both in terms of primary policies such as general or professional liability policies, and excess or umbrella policies. Brokers and defense counsel in turn should inquire as to the existence of any excess or umbrella policies and counsel their clients to comply with the notice requirements.

Once potential insurers are identified, the insured should determine whether everyone who requires notice has in fact received it, according to policy terms. It is not safe simply to notify the primary insurer (which is what Harvard did in this case,). This case is a reminder that there is no such thing as a case “too-big-to notify” a claims-made insurer: if the policy says an insured must meet certain notice requirements, then the insured must see to it that the notice meets those terms.