In the latest development in Harvard University’s legal battle against its former insurance broker, Marsh USA, over a costly coverage denial, Marsh has filed to dismiss the breach of contract claims in Harvard’s lawsuit arguing Harvard’s contract-related allegations are time-barred under the statute of limitations dictated by the parties’ 2014-2015 brokerage agreement.
Background on the Harvard-Marsh dispute
As background, Harvard sued Marsh in late 2023 for professional negligence stemming from the prominent university’s loss of $15 million in excess insurance coverage. The excess policy from Zurich American Insurance came into play after Harvard exhausted the $25 million limit in its primary errors and omissions policy with AIG in defending itself against an affirmative action lawsuit.
At issue in Harvard’s suit is the claim that Marsh failed to notify Zurich of the 2014 discrimination claim against Harvard until 2017, well past a January 2016 notice deadline in Zurich’s excess policy. With late notice as the sole reason, Zurich denied coverage when Harvard eventually submitted the claim in 2017. Harvard sued Zurich unsuccessfully. Based on this loss of coverage, Harvard contends that Marsh’s failure to notify Zurich violated their brokerage contract and Marsh’s basic duty of care.
For more details, see Agency Checklists’ October 23, 2023 article, “A New Lawsuit: Harvard’s $15 Million Dispute With Its Broker Marsh.”
Marsh removes Harvard’s state court action to the United States District Court
As often occurs in high-stakes litigation between in-state plaintiffs and out-of-state defendants, Marsh removed Harvard’s state court complaint to federal court and quickly filed a partial motion to dismiss, targeting Harvard’s contract-based claims.
New York law and a $10 million limit of liability to apply
Central to Marsh’s motion to dismiss’ argument is the choice of law and statute of limitations provisions in Marsh’s July 2014 to June 2015 engagement agreement with Harvard governing the relevant period. This brokerage contract specified both New York law would apply and set a $10 million liability limit for Marsh for any malpractice law.
New York’s six-year statute of limitations for contract claims
Critically, under New York’s six-year statute of limitations for contract breaches, Marsh asserts any claim would have expired in September 2022 – over a year before Harvard filed suit in late 2023. Marsh maintains January 30, 2016, was the latest possible breach date, when the Zurich policy’s notice deadline passed without Marsh notifying the excess carrier of the discrimination claim. With COVID-related tolling, the six-year clock then expired after September 15, 2022, according to Marsh’s math.
If Marsh’s calculations are correct, the statute of limitations on any of Harvard’s breach of contract claims expired thirteen months before Harvard filed suit.
The Tolling agreement between Harvard and Marsh
Harvard and Marsh did enter into a tolling agreement while Harvard’s appeal pended before the First Circuit Court of Appeals. This agreement suspended all statute of limitations between the parties from April 28, 2023, until either gave a 60-day notice of termination.
After the First Circuit rejected Harvard’s appeal of Zurich’s coverage denial, the parties terminated the tolling agreement, and Harvard commenced its action against Marsh.
If the dates Marsh claims are critical for statute of limitations purposes hold up, the tolling agreement has no relevance. April 28, 2023, the effective date of the tolling agreement, was still after the six-year statute of limitations expiration on September 15, 2022.
Harvard has until February 9, 2024, to file its opposition
Harvard faces a February 9 deadline to respond to the dismissal motion. The university might invoke the “discovery rule,” arguing any breach of contract claim did not ripen until Harvard allegedly learned in 2017 of Marsh’s Zurich notification failure. However, that argument may be a nonstarter. New York law triggers the contract statute of limitations from the date of the breach and not from the date of discovery.
Procedurally, Harvard might have an argument based on the terms of the brokerage agreement. Under § 3, the brokerage provided: “The term of Marsh’s engagement hereunder is one year starting on the Effective Date and may be extended in writing.” Marsh’s filings on its motion to dismiss do not show any extension “in writing” of the one-year engagement agreement.
If the parties proceeded without any renewal or extension of the brokerage agreement, that might lead to factual questions about what oral or informal arrangements were between Marsh and Harvard going forward. However, even if this case became one of factual disputes, Harvard still has a huge time gap to fill in to avoid an eventual dismissal on the grounds of the statute of limitations, in my opinion.
Agency Checklists will keep you posted on this mega-E&O case as it develops
Owen Gallagher
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Over the course of my legal career, I have argued a number of cases in the Massachusetts Supreme Judicial Court as well as helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
Connect with me directly, by calling me at 617-598-3801.
