Harvard Loses Bid to Recoup $15 Million in Legal Fees After Race-Based Admission Case

A view of the campus of Harvard Business School in Cambridge, Mass., on July 8, 2020. Maddie Meyer/Getty Images

Harvard University’s secondary insurance provider has no obligation to cover $15 million of legal fees incurred in the school’s failed attempt to defend its use of racial preference in admissions, the 1st Circuit Court of Appeals has ruled.

In 2014, amid the high-profile racial discrimination lawsuit brought by Students for Fair Admissions (SFFA), Harvard bought an excess insurance policy with Zurich American Insurance for legal fees exceeding $25 million. The policy had a $15 million limit and covered claims made between Nov. 1, 2014, and Nov. 1, 2015.

Under the terms and conditions of the policy, Harvard must formally notify Zurich about its legal claims within 90 days after passing the $25 million cap in order for the secondary policy to kick in. The 90-day window closed in January 2016, but Zurich didn’t receive a written notice from Harvard until May 2017.

Harvard sued Zurich in 2021 after the firm refused to cover the legal fees it racked up in the SFFA case, claiming that the insurance company “had knowledge of” the pending lawsuit because of extensive media coverage.

“Zurich surely knew about the SFFA Action in the year after it was filed, especially given the significant, ongoing attention that the suit received in local and national news,” Harvard’s lawyers argued in court filings.

In an Aug. 8 decision, a three-judge panel in the 1st Circuit unanimously upheld a lower court ruling that sided with Zurich, saying Harvard’s failure to give notice according to the policy’s terms and conditions “forfeits any right to coverage.”

“Consequently, Zurich had every right to deny coverage based on lack of timely notice,” Circuit Judge Bruce Selya, a Harvard Law alum, wrote for the panel of judges.

The panel also rejected Harvard’s argument that the 1st Circuit should recognize an “actual notice” exception to the general rule adopted by the Massachusetts Supreme Judicial Court, accusing the school of engaging in “gaslighting.”

“Arguing that the policy’s notice requirement should not be enforced because Zurich may have had actual notice of the claim is simply another way of arguing that Zurich was not prejudiced by the lack of timely written notice,” Judge Selya wrote, noting that deadlines are even more important in a claims-based policy.

A claims-made policy is meant to minimize the time between the claim being made against the insured during the policy period and the payment, the appeals court explained.

“If a claim is made against an insured, but the insurer does not know about it until years later, the primary purpose of insuring claims rather than occurrences is frustrated,” it stated.

“In Massachusetts, notice provisions of claims-made policies—which require that notice of a claim be given by the end of the policy period or a defined period ending shortly thereafter—are of the essence of those policies,” the opinion reads. “Those provisions are intended not merely to facilitate an investigation into the facts underlying a claim but also to promote fairness in rate setting.”

9-Year Legal Battle

The dispute over Harvard’s admissions policy was first raised in 2014 by SFFA, on behalf of a coalition of students who claimed to have been rejected because of their Asian ancestry. In 2020, the Court of Appeals for the 1st Circuit upheld a lower court decision that it isn’t discriminatory when Harvard considers an applicant’s race as one factor in its admissions process, prompting the SFFA to take the legal battle to the nation’s highest court.

In a 6–3 opinion issued in June, the U.S. Supreme Court declared it unconstitutional for colleges and universities to use race as a factor in deciding which students they admit.

Chief Justice John Roberts penned the decision for the court’s conservative-leaning majority, saying many U.S. institutions of higher education “have for too long ... concluded, wrongly, that the touchstone of an individual’s identity is not challenges bested, skills built, or lessons learned but the color of their skin.”

“Our constitutional history does not tolerate that choice,” he wrote.

In dissent, Justice Sonia Sotomayor painted a grim picture of the future of racial equality in the United States, expressing frustration that her conservative colleagues cemented “a superficial rule of colorblindness” as a constitutional principle in an “endemically segregated society.”

“The Court subverts the constitutional guarantee of equal protection by further entrenching racial inequality in education, the very foundation of our democratic government and pluralistic society,” she wrote.