Duke has filed suit seeking compensatory and punitive damages from National Union Fire Insurance Company for refusing to pay the expenses of the University's settlements with members of the 2005-2006 men's lacrosse team.
The suit stems from a dispute between Pittsburgh-based National Union-an affiliate of American Insurance Group, Inc.-and United Educators Insurance, another company with which Duke has a policy, The (Durham) Herald-Sun reported Nov. 26. The two insurance companies are wrangling over who is obligated to cover the University's legal expenses for a settlement with the three wrongly indicted former lacrosse players, sources told The Herald-Sun.
"Duke believes that our insurance companies should meet their obligations and we will pursue all options available to us," Michael Schoenfeld, vice president for public affairs and government relations, said in an interview with The Chronicle Sunday. "While Duke sought to address this without resorting to a lawsuit, we were not able to reach a satisfactory outcome and thus turned to the courts."
The suit was filed Monday in U.S. District Court for the Middle District of North Carolina by attorneys from the law firms of Kilpatrick Stockton and Gilbert Oshinsky on behalf of Duke University and Duke University Health System.
In the lawsuit, Duke alleges that National Union's failure to cover the University's expenses was a "malicious" breach of contract that forced the University to shoulder the full financial burden of the settlement with Collin Finnerty, Reade Seligmann and Dave Evans, Trinity '06, the players who were falsely indicted on rape charges from exotic dancer Crystal Mangum.
"National Union's actions in adjusting and denying the underlying claims were willful, wanton, malicious, without justification or excuse and taken in bad faith to further National Union's own improper objectives and with the conscious intent to injure Duke," the suit reads.
Duke kept National Union informed as the lacrosse case unfolded, and the insurance company acknowledged in writing at least four times that the University would potentially be covered under its policies, according to the lawsuit. The suit makes no mention of National Union's reasons for refusing to cover Duke's legal expenses.
"National Union has attempted to settle Duke's claims under the policies for far less (i.e. nothing) than the amount a reasonable person would believe Duke is entitled to recover under the policies," the suit reads.
Professor of Law Thomas Metzloff predicted that the timing of Duke's various lacrosse-related claims will be the subject of great legal scrutiny for this suit. The University settled with Finnerty, Seligman and Evans in June 2007, falling squarely within the time frame for Duke's policy with National Union, which was good through December 2007, he said.
But Duke is still locked in several legal battles resulting from the lacrosse case, including a suit from former men's lacrosse coach Mike Pressler and two separate suits from unindicted members of the 2005-2006 men's lacrosse team.
National Union may allege that it is not responsible for the University's current legal troubles because they arose after the policy expired-which would be a devastating financial blow to Duke if the argument holds up in court, Metzloff said.
"You're talking hundreds of thousands of dollars a month in legal fees [for Duke's unresolved suits]," he said. "[Duke] really wants a declaration that the insurance policies cover these claims."
Though Duke negotiated with Finnerty, Seligmann and Evans while it was still insured by National Union, the company may shirk responsibility for the damages because the settlement was reached out of court, Metzloff said.
"The insurance company may say, 'You really didn't owe [Finnerty, Seligmann and Evans] anything-you chose to settle for personal reasons,'" he said. "[National Union] may say, 'There really wasn't a legal claim they had against you.'"
Metzloff added that the nature of the lacrosse case and the flurry of litigation it triggered could ultimately favor National Union in court.
"This is not the usual kind of complaint you'd expect-like a medical malpractice complaint," he said. "Everything about the lacrosse case has been unusual. They might say this falls outside the claims that the policy was trying to cover."
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