Judge Rules New York Law Applies, Dismissing Harvard’s Contract Claims: Leaving Negligence

The Latest Turns In This Complex Insurance Coverage Case

In a major setback for Harvard University in its legal battle to collect multi-million dollar damages from its insurance broker, Marsh USA Inc., the United States District Court for the District of Massachusetts granted Marsh’s motion to dismiss Harvard’s breach of contract claims on August 15, 2024.

As previously reported by Agency Checklists, Harvard sued Marsh in October 2023, alleging that the broker’s failure to notify Zurich American Insurance of a discrimination lawsuit in a timely manner resulted in the loss of $15 million in excess coverage. The discrimination suit in question was the high-profile Students for Fair Admissions (SFFA) lawsuit against Harvard’s admissions policies, which Harvard ultimately lost in a landmark U.S. Supreme Court ruling. See Agency Checklists’ article of October 31, 2023, “A New Lawsuit: Harvard’s $15 Million Dispute With Its Broker Marsh.”

Harvard’s lawsuit against Marsh had four counts alleging:

Count I, “Broker Malpractice,” as a breach of the brokerage contract between Harvard and Marsh seeking to have the six-year contract statute of limitations begin as of Zurich’s denial of coverage.

Count II, seeking a declaratory judgment on the same allegations as Count I for Marsh’s alleged breach of its brokerage contract with Harvard.

Count III, asserting “Broker Malpractice” against Marsh as an error and omission tort claim based on Marsh, as Harvard’s insurance broker, assuming “a duty to act in accordance with the standards of care applicable to professionals in the insurance brokerage industry, both nationally and in Massachusetts;” and,

Count IV, requesting the court issue a declaratory judgment on the same allegations as Count III for Marsh failing to act within the generally accepted standards of care in reporting a claim made against its client.

Marsh’s motion to dismiss Harvard’s contract claims

Marsh responded to Harvard’s lawsuit, moving to dismiss Counts I and II of the complaint.

Marsh’s motion argued the terms of the written brokerage agreement between Harvard and Marsh required the court to apply New York law to determine if Harvard had filed its suit within the statute of limitations. Harvard argued in opposition that Massachusetts law should apply as a matter of public policy.

The viability of Harvard’s breach of contract counts rested on whether the Court would agree that Massachusetts laws should apply in determining whether Harvard filed its suit in time to avoid dismissal on statute of limitations grounds.

Judge Burroughs’ ruling New York law applied to Marsh’s brokerage agreement

In her ruling on Marsh’s motion, Judge Burroughs rejected Harvard’s argument for a functional approach to determining the applicable law. Instead, she emphasized the importance of the contractual choice of law provision and noted the substantial relationship between the transaction and New York, given that Marsh maintains its principal place of business there.

Harvard’s contract claims fail on New York’s rigid statute of limitations rule  

Once Judge Burroughs decided New York law applied, she made rulings on Marsh’s statute of limitations defense, finding that breach of contract claims are subject to a six-year statute of limitations under New York law.

Under Massachusetts law, six years for filing the action would also have applied. However, the statute of limitations would have run from when Harvard first learned about Marsh’s failure to notify Zurich in 2017 about the filing of the SFFA lawsuit.

In New York, the judge noted that the statute of limitations for breach of contract claims begins to run from the date of the breach, regardless of whether the party seeking to sue only learned of the breach at some later date.

Based on the date of the breach, Judge Burrough ruled Harvard’s cause of action against Marsh began to accrue when Marsh allegedly first breached its broker agreement with Harvard. She calculated that this date occurred when Marsh failed to notify Zurich of the SFFA lawsuit within 90 days after the end of the policy period, which was January 30, 2016.

Similar to Massachusetts, New York had a tolling of statute of limitations during the COVID-19 pandemic. This tolling period gave Harvard an extra 228 days, extending its New York deadline for filing its suit to September 15, 2022.

Unfortunately for Harvard, it did not file its suit until October 2023, thirteen months too late by Judge Burrough’s reckoning.

Court dismisses breach of contract counts, but negligence counts remain alive

Based on its ruling, the court dismissed Counts I and II of Harvard’s complaint, which alleged breach of contract, and sought a declaratory judgment on the same grounds. While the ruling does not directly address Counts III and IV of Harvard’s complaint, alleging broker malpractice in tort, it raises questions about their viability given similar statute of limitations concerns.

Looking ahead

Although Judge Burrough’s ruling only affected Counts I and II of Harvard’s complaint, the complaint’s remaining error and omission claims under Counts III and IV of the complaint.

New York, like Massachusetts, has a three-year statute of limitations for insurance agents and brokers.

There are jurisdictions, like Florida, where Harvard’s errors and omissions claim would not have accrued until the final ruling on August 9, 2023, denying Harvard’s appeal of its coverage suit against Zurich. See Agency Checklists’ article of August 15, 2023, “The Pitfall of Late Notice: Harvard’s $15 Million Coverage Loss.” However, New York does not appear to follow Florida’s practice.

In New York, Harvard’s cause of action for negligence against Marsh likely would have accrued, and the statute of limitations begun to run when Harvard received notice on October 25, 2017, from Zurich would not afford any coverage for the SFFA suit because of Marsh’s late notice.

Thus, if its remaining claims are dismissed, Harvard will have reached the end of the road in pursuing an indemnity based on the excess policy it bought from Zurich through Marsh.

Agency Checklists will continue to monitor this case closely and provide updates as it progresses through the legal system.

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.