Adventures in the Law: Absent Minded Professors

According to conventional wisdom, the intellectually gifted are prone to absent-mindedness. The underlying theory, apparently, is that their minds are so full of complicated arcana that there's little room for the mundane practicalities of everyday life.

If an entire group is regarded as intellectually gifted, it's a university faculty. If asked which university faculty is the most intellectually gifted, many Americans would answer with any of the Ivy League schools in America.

That's why the tale of a university's apparent forgetfulness in its long-running legal battle with an insurance company is so fascinating--and, in a way, humorous.

The university in question bought a secondary excess insurance policy from an insurance company to cover up to $15 million in costs above its $25 million primary policy for the policy period November 1, 2014, to November 1, 2015. The claims-made policy required notice of any claim within 90 days of the end of the policy period, i.e., January 30, 2016.

In November 2014, The university was sued for allegedly violating the Civil Rights Act of 1964 by favoring racial minorities in its admissions program. Within 48 hours, the university, through its broker, notified its primary insurer of the litigation.

After exhausting the limits of the primary policy, the university notified its insurance company, its excess carrier, of the litigation. their broker denied coverage. Why? Because the university notice was dated May 23, 2017, i.e., nearly 16 months after the notice date specified in the policy.

In other words, the university had forgotten to notify its insurer on time!

The university sued the insurer for breach of contract but lost on summary judgment. The university appealed, arguing first that strict compliance with the policy's notice requirement was not necessary and second that the insurer had "actual" notice—i.e., the broker read about the case in the newspaper! The appellate court rejected the first argument on the basis of a state law and the second because the university had failed to raise it below.

The university had forgotten to raise the defense at trial!

But wait! The university recalled that in November 2014, it had asked its broker to inform its primary insurer of the lawsuit. The broker should have had enough sense to inform the insurer, as well as the primary insurer. Wasn't its failure to do so a breach of contract?

The university dutifully filed suit against the broker, arguing that it had breached its broker's contract by failing to inform the insurer of the lawsuit and should, therefore, be required to cover the losses resulting from failure to provide timely notice to the insurer.

Does the university's position sound reasonable and valid? Yes. Did the university win the suit? No. Why not? Because, again, it had waited too long to act. Under New York law, which governed the university's contract with the broker, the statute of limitations for contracts is six years. Even with the additional 228 days, the governor added as a COVID tolling period, the deadline for the university's suit against the broker was in September of 2022. However, the university waited until October 2023 to file. Case dismissed.

The university's memory had failed yet again!

Could there be a better demonstration of absent-mindedness than a university that (a) forgot to inform its excess insurer of a multimillion-dollar claim on time, (b) forgot to make an actual notice defense argument until it was at the appeal level, and then (c) forgot to sue its insurance broker until after the suit was barred by the statute of limitations? But, hey, it's only $15 million.