An interesting "conversation" re: Duke's National Union suit

An outstanding comment thread follows Duke filing against insurer comments & my responses. I urge all with an interest in the Duke lacrosse suits to read it, if you’ve not already done so.

I’m taking excerpts of four comments and posting them here because together they make a very interesting “conversation.”

The first comment on the thread is from Drew and included - - -

. . . I should point out that I am not an expert in university or not-for-profit insurance. As a result, I am largely unfamiliar with what Duke has characterized as an "I&O" policy. Nonetheless, the manner in which they describe the policy sounds very similar to a Directors + Officers Liability policy, with which I have more than passing experience.

These policies do indeed cover "wrongful acts", and do describe what those wrongful acts are.

However, Duke's lawsuit seems to drive too hard on only one small portion of the insuring agreement (i.e., the "wrongful act[s]"), without making any reference to the many exclusions that no doubt are also a large portion of the policy.

I suspect that we could all agree that some wrongful acts occurred in Durham in 2006.

The fundamental question, however, is whether or not they fall within the insuring agreement in the policy (the fact that it was not appended to Duke's filing suggests to me that their counsel would not like to have the full policy subject to review), AND are not excluded by the policy's other provisions.

In insurance claims work, the process is usually rather simple - you determine whether an occurrence took place (was there a loss?); whether it falls within the insuring agreement (is it potentially covered by the policy?) and then whether or not the loss/occurrence is excluded by the policy.

All the definitions, conditions, endorsements, etc. that are attached to most policies are there to provide some contractual insight into how to address the three questions above.

My suspicion is that National Union (who are not a bunch of rubes who just fell off the turnip truck in matters such as this) was compelled to acknowledge Duke's initial notice of the case; thus, the letter advising that the events were "potentially" covered.

But they also "reserved rights", which is a nice way of saying that they didn't think there was going to be coverage in the claim, and would continue to investigate the second and third of the questions above.

That investigation is not yet complete; however, Duke has always had the opportunity to "go it alone" (as they appear to have done) with the proviso that they could force National Union to cover 100% of the claim (subject to some conditions regarding the policy's limit of liability) in the event that Duke is/was successful in arguing that the claim is in fact a covered event.

Personally, my opinion has long been that the retention of Jamie Gorelick as counsel for Duke in the underlying claims is the tip-off that Duke has parted ways with its insurers.

Ms. Gorelick is not the type of lawyer that competent insurers like National Union would retain to defend its insured; National Union would insist on counsel who is familiar with the insurance specialty, and is an accomplished litigator.

Ms. Gorelick and her firm are lightweights in the type of litigation involved in the underlying legal actions, and (my opinion here) was likely selected for their political and lobbying connections.

There are plenty of other lawyers without such name recognition and/or Washington insider status that have far better track records in actually defending these types of claims successfully. National Union would likely have insisted on such a firm to defend itself (as the indemnitor of Duke), rather than go with the PR-type firm.

The ultimate resolution of this matter will likely not take place very publicly, as National Union's reply brief will likely start to lay out "minor" things such as the applicable exclusions from the policy, and their reading of the action(s) taken by Duke and DUMC based on the presumed extensive cooperation National Union has had under the terms of the policy.

If, in fact, Duke provided National Union with the cooperation that I fully suspect that NU demanded, it would certainly be out of character vis-a-vis Duke's other comments in this matter.

Duke's case in general is some measure of proof that their counsel are not familiar litigators in this type of matter, and that the University seems to be relying on its reputation and brand name to insulate it from any adverse outcome. I'm sorry to say that I believe this is one instance where Duke will not be able to BS their way through the legal system, nor can they rely on their reputational capital to get them off.

Further down the thread BN made two successive comments which I’ve excerpted and place here as one.

From BN - -

Duke stated in its filing that it notified the insurance company on March 30, 2006. This date becomes very relevant. The lacrosse players' attorneys in the civil suits will have a strong argument that this was the date that Duke first believed that it could face future litigation from its actions.

As such, Duke would have been required to preserve all related documents ( letters, e-mails etc.) as of March 30,2006 and going forward.


There was a meeting on March 29, 2006 which was attended by [the DU police director Robert Dean and Dean’s supervisor, VP for Campus Security Aaron Graves] and a number of Durham officials including city manager Baker, police chief Chalmers, deputy chief Hodge, Gottlieb , Himan and an attorney from DPD. [I’ve been told the police attorney was Toni Smith. - - JinC].

This was not, I believe, merely a case status meeting, as has been reported based on responses from Durham officials and John Burness , who did not even attend.

This many senior officials and an attorney typically would not attend a routine meeting. I believe that there were several important issues discussed at that meeting which involved Duke's cooperation with and/or tacit approval of some very questionable and/or illegal activities, namely

1) Request for the players' key card information for March 13 and 14, 2006. This was provided, in violation of FERPA, by DUPD to DPD on 3/31/06. Two months later Duke officials conspired with Durham authorities in an elaborate cover up scheme involving the issuance of fraudulent subpoenas. [That cover-up scheme involved Nifong formally requesting that Duke provide him the FERPA-protected key card information Duke had already given him on March 31, and Duke going along with the deception by, among other things, sending letters to the players requesting their consent to release the protected information. - - JinC]

2) Players' DNA testing results from the SBI lab, which Durham authorities ( Nifong/police) knew were negative as early as 3/28/06. . . .

This was not, in my opinion, a status meeting. This was a meeting to solicit Duke's cooperation in the prosecution ( persecution ) of the lacrosse players.

Drew responded to BN - - -

Thanks for reminding me about the keycard data issue. I had neglected that earlier. This was clearly an act by Duke personnel (almost assuredly with senior management approval) that was clearly in violation of the FERPA act.

In other words, an illegal act condoned/committed by Duke, the insured in the soon-to-be famous I&O policy issued by National Union. [all emphasis added]

Insurance protection against illegal acts is against public policy in virtually every jurisdiction in the country; thus, National Union already has the means to invoke that exclusion in their policy.

Based on the dates of the events (if what we read is correct), the filing of Duke's notice of a potential occurrence (bear in mind that they [Duke] did not yet have a claim made against them) following the illegal act would likely negate coverage altogether, since National Union could argue (probably rather easily) that Duke's notice was made in bad faith, since they knew their own personnel had already broken the federal law.

It shouldn't be too difficult to get one of the lower-echelon employees that Duke will try to throw under the bus to testify that Duke's senior management was aware of the key card matter at the time they filed with National Union.

Don't put your money on Duke in the ensuing litigation with National Union.

AIG's claims people are too smart and experienced to allow their own underlings to deny payment in a claim that could be potentially such a large PR issue. My suspicion is that National Union has very good policy language, law, and facts on their side.

It will be fun to watch.

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I thank Drew, BN and every other commenter on what is an informed and judicious thread.

John