Coverage for Investigations and Conflicting Endorsements: Syracuse University Decision is Great for Policyholders

by McCarter & English, LLP

Just before the New Year the New York Appellate Division affirmed in about a dozen words the trial court decision in Syracuse University v. National Union Fire Insurance Co. of Pittsburgh, Pa., No. 2012EF63, slip op. at 2 (N.Y. Sup. Ct. Mar. 7, 2013), finding that attorney general investigations and grand jury subpoenas potentially implicating an insured trigger the duty to defend and the duty to advance defense costs. The court’s decision also affirms that conflicting endorsements simultaneously issued at inception are ambiguous and to be construed in favor of the policyholder. See Syracuse University v. National Union Insurance Co. of Pittsburgh, Pa., 2013 WL 6823101 (App. Div. Dec. 27, 2013).

Syracuse University’s assistant basketball coach was alleged to have sexually abused ball boys, and criminal investigations ensued during which Syracuse was compelled to respond to grand jury subpoenas from the United States Attorney’s Office and County District Attorney’s Office. The broad subpoenas sought electronic equipment issued to the coach, information on the coach's hotel accommodations while traveling with the team, records relating to complaints about the coach and the university’s response, the coach’s telephone records, internal communications after the coach was suspended, internal communications referring to Jerry Sandusky, and “records relating to the Syracuse Men’s Basketball road games, meet and greet sessions and video footage of the games.”

Syracuse put liability insurer National Union on “notice of circumstances” likely to lead to a claim upon the first media report of the coach’s alleged abuse. Syracuse advised National Union, upon receipt of the grand jury subpoenas, of the formal claim under its policy. National Union, however, asserted there was no claim as that term was defined in the policy, and when Syracuse filed suit, followed by dueling motions for summary judgment, the court agreed with Syracuse.

It observed that “claim” is defined in the policy as:

    (1) A written demand for monetary, non-monetary or injunctive relief; or 

    (2) A civil, criminal, administrative, regulatory or arbitration proceeding for monetary or non-monetary relief which is commenced by: (i) service of a complaint or similar pleading; or (ii) return of an indictment, information or similar document (in the case of criminal proceeding); or (iii) receipt or filing of a notice of charges. Slip op. at 3.

Wrongful act was additionally defined as “any breach of duty, neglect, error, misstatement, misleading statement, omission or act by or on behalf of the organization.” Id. The trial court noted that each subpoena stated “YOU ARE HEREBY COMMANDED” to appear and to produce documents and that under state and federal law “failure to comply with a grand jury subpoena is punishable by fine or imprisonment as contempt of court.” Id. Under a plain meaning of the term, these constituted demands for non-monetary relief and thus claims. Id. at 4.

The court found further support in an unreported decision from the Eastern District of Texas, Agilis Benefit Services, LLC v. Travelers Cas. and Sur. Co., NO. 5:08-CV-213, 2010 US Dist. Lexis, 144499, 30-31 (E.D. Tex. Feb. 24, 2010), and a decision from the Second Circuit interpreting New York law. Id. at 4, citing and quoting MBIA, Inc. v. Federal Insurance Co., 652 F3d 152 (2d Cir. 2011). The court repeated the Second Circuit’s ruling: 

We reject the insurers’ crabbed view of the nature of a subpoena as a “mere discovery device” that is not even “similar” to an investigative order. The New York case law makes it crystalline that a subpoena is the primary investigative implement in the NYAG’s tool shed. We also reject the insurers’ argument that because the definition does not include a proceeding commenced by service of a subpoena, a subpoena is not included. This reading puts form over substance; the fact that the definition does not say “service of a subpoena” is not dispositive. Id. quoting MBIA, 652 F.3d at 160.

The court rejected National Union’s assertion that Syracuse was not a formal target at the time of the subpoenas. First, the U.S. Attorney Manual, on which the insurer relied, did not constrain the U.S. Attorney’s Office from bringing criminal charges. Id. at 5. Second, the information sought, particularly questions concerning the university after the coach was suspended, “was for the prosecutor to determine whether the plaintiff was engaged in an institutional coverup of [the coach’s] alleged misdeeds, similar to that of Penn State, and was thus engaged in a breach of duty.” Id. at 6. “But whether a formal target or not, it is clear that the subpoenas sought “facts ... of a wrongful act” concerning plaintiff's conduct, defined as “any breach of duty, neglect, error, misstatement, misleading statement, omission or act by or on behalf of the organization,” subsequent to [the coach’s] departure.” Id. at 6. Since a duty to defend is triggered by a potential claim implicating the policy’s coverage, it could not “be said that there is no possible or factual legal basis upon which the defendant may eventually be obligated to indemnify the plaintiff.” Id.

One of the key rulings by the court related to allegedly conflicting endorsements. The endorsements had been issued simultaneously at inception, and the court noted that “[a]ll other terms, conditions and exclusions remain unchanged.” Id. There was no express statement that one endorsement superseded the other; instead, “the policy contains two policy provisions, both adopted at the same time, which are in conflict. The ambiguity thus created by the conflict must be resolved in favor of coverage if such a reading is reasonable.” Id.

The New York Appellate Division’s affirmance of the trial court ruling, therefore, is important because it affirmatively expands coverage both with respect to government investigations and the interplay of conflicting policy endorsements.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McCarter & English, LLP | Attorney Advertising

Written by:

McCarter & English, LLP

McCarter & English, LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.