Monday, September 20, 2021

How do you rack up $25 million in attorney's fees on a single case?

Practice, I guess.  

Universal Hub posted this article about Harvard University's lawsuit against its excess carrier,* Zurich American Insurance Company, seeking reimbursement of costs in excess of the $25 million limit of its primary policy.  The costs were incurred in defending against the high-profile lawsuit alleging that Harvard's admissions policies discriminate against Asian-American students.  In other words, Harvard has spent more than $25 million in attorney's fees and associated costs on that case alone. 

According to the complaint, Zurich denied coverage because Harvard provided it with late notice of the admissions lawsuit.  The lawsuit was filed in November 2014.  "Upon information and belief, Zurich had knowledge of the [admissions] Action by late 2014 or early 2015, and no later than January 30, 2016."   Harvard provided Zurich with formal notice of the lawsuit in May 2017. 

Let's let that breathe for a second.

While incurring tens of millions of dollars in legal fees it took Harvard's attorneys two and a half years to give Zurich formal notice.

Let's be clear:  Formal notice is a letter:  Hi Zurich, please be informed that we are being sued.  Here's a copy of the complaint. This is a big one, so our primary policy may be exhausted and you might have to provide coverage."

Harvard alleges that it gave formal notice to Zurich as "as soon as practicable, given the attachment point of the Zurich policy and the state of the [admissions] Action and its defense at or about the time that formal notice was provided."  In plain language, Harvard is saying that it wasn't until around the time that it provided formal notice to Zurich that it realized its fees would exceed $25 million.  And  who can blame it?  Who would imagine that Harvard could possibly spend that much in attorney's fees? 

If you were wondering, there is no rule that says you can't put your excess carrier on notice just in case your primary limits will be exhausted.  

Some thoughts:

1)    In Massachusetts, with an occurrence-based policy (which I assume the Zurich policy is) an insurer has the burden of proving that it was prejudiced by the late notice.  That's a difficult standard to meet, at least with respect to indemnity payments where a primary insurer is paying a competent attorney to defend a case.  Where this claim is not for indemnity but defense, Zurich would need to show that it was prejudiced because if notice had been given earlier it could have prevented the attorney's fees from becoming so outrageous.  But it really did not have the power to do that.

2)   If an insurer loses a declaratory judgment action over a duty to defend, it not only has to pay the reasonable attorney's fees incurred by the policyholder in the underlying case but also the fees incurred in the declaratory judgment action.  Reasonable is the operative word here.  Will Harvard's attorney's charge it another $25 million for the insurance lawsuit?  Maybe, but they'll be hard-pressed to find a judge who rules that such fees are reasonable.  

3)    $25 million in attorney's fees? Seriously?

The complaint alleges that in the admissions lawsuit Harvard:

 -- Engaged in extensive pre-trial discovery and motion practice;

-- Defended a trial over a three week period (carefully phrased to make me question how many of those days were actually in trial);

 -- Defended an appeal in the US Court of Appeals for the First Circuit;

--Collected and produced thousands of business records to the Department of Justice for a parallel investigation it was conducting.  

Let's do some easy math.  Say there were two partners and two associates at the trial fulltime, and they charge an average of $800 per hour.  Let's say the trial actually took fifteen days, and they were full trial days.  (Often trials go from 9 AM to 1 PM.)  And each attorney had two hours of transportation time a day.  That's 600 person hours, or  $480,000 just on courtroom time.  Generously assume 1,800 hours, or $1,440,000, for trial prep before and during trial.  Let's say 3,600 hours, or $2,880,000, for discovery and motion practice.  Let's throw in another 1800 hours, or $1,440,000 for the appeal,  No details are provided for collecting and producing records for the Department of Justice, so I'll assume this is not basic first year associate busy work, and I'll throw in another $1,440,000 for that.  And let's say $2 million for outside consultants.  And $1 million for miscellaneous such as super expensive courier fees.

So, at the far end of my imagination, charging a crazy hourly rate, having too many people assigned to the case, and overlitigating everything, I come up with attorney's fees of $10,680,000.  

Harvard, call me.  I'll give you a great deal on fees. 

(Although I make light of the fee issue, I don't make light of the lawsuit itself or Harvard's defense of it. I am the parent of a college student who has just been through the admissions process wringer and a high school student who is about to go through it.  I am also the grandchild of two Jewish men who were admitted to Harvard during the time of quotas, I understand that these are very serious issues at play.) 

*    I would call Zurich an umbrella carrier, but if Harvard wants to pay me the rates it pays its attorneys I'll be happy to call it an excess carrier. 

Thursday, August 19, 2021

Another houskeeping post (sorry!)


Contrary to my post from the other day, if you are already subscribed to receive email notifications of new posts from this blog you will receive an email asking if you want to remain subscribed.  Please say yes!  

To be clear, the new service does not sell your information (and neither do I), although you will receive ads (typically suggested blogs you might enjoy) in the email notifications.  This is an unfortunate but necessary technical change that allows me to continue to keep you apprised of new posts. 

Tuesday, August 17, 2021

Housekeeping post

Updating:  Actually, you will receive an email asking you to confirm that you want to keep your (free) subscription to my blog.  Please say yes!  Neither the subscription service nor I share your email addresses with anyone. 

A minor change to my blog:  If you are already following it and receiving email notifications, you do not need to do anything.  If you would like to follow it, enter your email where indicated in the left column.  You will need to confirm -- check your junk filter for that.

Thursday, June 17, 2021

My usual rant: Summer camps should not make parents sign waivers of liability


Regular readers of this blog know that my pet peeve is requiring people to sign waivers of liability to participate in activities, and that I particularly despise them for children's activities.  Of course I am thrilled that my kids can attend summer camps this summer -- but that thrill is diminished by the camps telling me that they refuse to take responsibility for their own negligence.  If I want my kids to go to camp, I need to accept that if they get hurt they will have no recourse, even if the fault was entirely the camp's.  Paralyzed for life because the camp's bus driver was drunk?  Oh well.  

The waiver that really got my blood boiling this week begins with the following (the camp will remain nameless to protect . . . everyone):  

Our work would not be possible without a covenant of trust between you (the parents and guardians of our students), and us (the staff and teachers at the camp).

So far so good.  I am happy to trust the camp to be responsible for the well-being of my child.  Naturally that responsibility includes if the camp makes a  mistake and my child is injured as a result.  

The release continues:

By enrolling your child in this program, you will be asking us to care for their personal physical and emotional needs, while at the same time creating a safe, nurturing student community and providing fun and appropriate challenges and adventures.

Yes!  This camp sounds awesome!

This is a wilderness camp and the waiver goes on to list all the potentially dangerous things that entails, from stubbed toes while walking barefoot to getting hit by a falling tree branch.  

The waiver requires me to release the camp from all liability for risk of harm inherent in the camp activities.  I'm okay with that. 

But then the waiver also requires me to release the camp from all liability for risk of "other" harm -- meaning harm that is not inherent in the activities.  That's outrageous.

As I've often said, if my child is participating in a gymnastics program I am happy to waive any liability the program may have if my child is injured as a result of falling off a balance beam. That risk is inherent in the sport of gymnastics and you cannot participate in gymnastics without taking that risk.  

But I am not happy to waive my child's rights if they are injured as a result of a balance beam falling on them. That is not an inherent risk of participating in gymnastics, and if it happens the program needs to take responsibility. 

How does the program protect both my child and itself?  It buys liability insurance.  

Mistakes happen, even in the best programs.  If a camp wants to enter into a "covenant of trust" with me, as it writes in its waiver form, it can show that it has my child's best interests at heart by buying adequate liability insurance, not by requiring me to give up my child's rights.  

Sunday, June 6, 2021