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Duke Suing Its Insurers in Lax Settlement
« on: December 19, 2008, 02:35:59 PM »

  Duke Sues AIG Over Legal Costs From Stripper Dispute (Update1)

http://www.bloomberg.com/apps/news?pid=20601103&sid=a6dLd_L49_Cs&refer=us

By Erik Holm

Dec. 18 (Bloomberg) -- Duke University sued American International Group Inc. for failing to pay legal costs tied to the school’s court battle with lacrosse team members falsely accused of sexually assaulting a stripper.

An AIG unit that sold the university insurance for legal costs has “acknowledged potential coverage,” according to a complaint filed Nov. 24 in federal court in Durham, North Carolina, where Duke is based. A lawyer for AIG said the company offered $5 million.

Duke is seeking payment for costs related to confidential settlements with three members of the team who were exonerated after they were accused of rape by a stripper invited to a team party in 2006. The school also wants reimbursement for expenses from defending against lawsuits by unindicted players and another by the team’s former coach over Duke’s role in investigating the accusation. The athletes said Duke remained silent during the probe even though the university had evidence they were innocent.

AIG “has offered to pay $5 million, and probably will still pay it anyway because we have to perform under our contract,” said Joseph O’Neil, a lawyer at Peabody & Arnold LLP in Boston representing the insurer. The $5 million represents the maximum under the applicable policy, O’Neil said. AIG’s National Union Fire Insurance Co. of Pittsburgh, Pa. unit may file a response by Jan. 16, said O’Neil, who declined to comment further.

The university asked the court in the AIG case last month to award damages and reimbursement for its costs, which it left unspecified except to say they were more than $75,000. Duke purchased two so-called individual-and-organization policies protecting the school and some of its administrators from legal costs, according to the complaint.

Prosecutor Disbarred

Michael Schoenfeld, a spokesman for the university, declined to comment. Duke’s attorney, Betsy Cooke, didn’t return calls seeking comment.

The three players were indicted in April 2006 after Durham County District Attorney Michael Nifong concluded a monthlong investigation into the alleged assault on a 27-year-old stripper. Nifong was later criticized for bringing the case without sufficient evidence and inflaming racial animus in Durham.

State prosecutors took over the case in January 2007 at Nifong’s request. State officials later said the players were innocent, and Nifong was disbarred last year for unethical conduct during the investigation. He served a night in jail for lying to a judge about the evidence and later filed for bankruptcy protection from his creditors.

Duke said in June 2007 it reached a settlement with the three athletes. Details of the accord weren’t released.

The AIG suit was previously reported by the Herald-Sun newspaper in Durham.

The case is Duke University and Duke University Health System Inc. v. National Union Fire Insurance Co. of Pittsburgh Pa., 08-cv-0854, U.S. District Court, Middle District of North Carolina (Durham)
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Re: Duke Suing Its Insurers in Lax Settlement
« Reply #1 on: January 19, 2009, 04:22:20 PM »

   Today from KC over at Durham in Wonderland:
        National Union, the insurance company sued by Duke, has filed its response—and the brief makes for interesting reading.


Among the claims:


1.) Since December 3, 2007, according to National Union’s filing, Duke’s lacrosse case legal expenses have exceeded $5 million.

From the brief: “Pursuant to the 2006 Policy, Defendant has advanced and paid to Plaintiff Duke University as defense costs the full $5,000,000.00 policy limit.”

If true, this assertion is extraordinary: Duke has exhausted its legal limit for defense costs before the case has even entered discovery. The University, it seems, is gambling everything on prevailing at summary judgment.

(National Union also is claiming that because Duke didn’t first inform the carrier that civil suits likely would be filed until December 3, 2007, the company isn’t liable for any of the University’s legal fees before that date.)

2.) Duke first notified its insurance carrier of potential legal liability through a letter sent on March 30, 2006. The letter’s wording provided “notification of an incident only as required by the policy conditions under the referenced policy. No claim has been made against Duke at this time. Rather than repeat the alleged circumstances, I have attached a number of newspaper articles that summarize all that is publicly known about the situation at this time.”


The highlight of the article packet that Duke passed along: Samiha Khanna’s wholly false article of March 25, 2006.


Duke’s March 30, 2006 letter is interesting in two respects. First, it was sent out not when Duke first learned that a local woman had made criminal allegations against Duke students. Instead, Duke notified its insurance carrier one day after Mike Nifong and the DPD were informed that DNA tests revealed no matches to any lacrosse players.


Second, Duke elected to forward to its carrier “all that is publicly known about the situation at this time.” But the University knew that at least some of this “publicly known” information—most notably, the claim that the lacrosse players hadn’t cooperated with police, and instead had erected a “wall of silence”—was false. It’s not clear why Duke would have chosen to pass along information that University officials knew was false, even if that information had appeared in the local and national press.


(National Union also cites the March 2006 letter as important for the company’s legal case; it points to a clause in its 2007 insurance policy with Duke that precludes any coverage from the policy for events that Duke brought to the carrier’s attention in the previous year.)


3.) Duke reached a settlement with the three falsely accused players without informing its insurance carrier, and ignored subsequent requests from National Union for more information on the settlement. Duke also hired outside counsel (Jamie Gorelick of the Washington, DC firm of Wilmer Hale) without clearing the selection with its insurance carrier.


The filing adds an intriguing claim: in its confidential settlement with the falsely accused players, “Duke may have admitted or assumed liability with the Duke Three.” (Duke has refused to supply the insurance carrier with a copy of the settlement.)


4.) In a February 2008 letter, National Union informed Duke that some of the lacrosse players’ claims—if true—involved actions by University officials beyond topics covered by the insurance policy. The letter cited items such as allegations of “false and misleading statements made with intent to conceal”; “public statements made with deliberate indifference and callous disregard for the truth”; and “repeated proffer of false testimony.” (On this point, allegations regarding Duke’s violation of FERPA seem especially troublesome for the University.) The carrier also noted that other alleged actions seemed to involve the defendants’ personal behavior (Pres. Brodhead’s public musings about the lacrosse players’ personal character?) rather than any action in their official capacity.


5.) According to National Union, Duke’s bizarre defense of former SANE nurse-in-training Tara Levicy’s conduct—that she is liable only for claims of medical malpractice, not for providing false information in an official capacity to authorities—means that there’s no coverage under National Union’s policy.


Medical malpractice claims, National Union argues, are covered instead by a Duke policy with Durham Casualty Company, Ltd. The brief hints at why Duke might want National Union rather than Durham Casualty to cover any judgments related to former SANE nurse-in-training Tara Levicy: “DCC is a captive insurance company that is wholly owned by Plaintiff Duke University.” In other words, one way or the other, Duke would be paying for Levicy’s misconduct.


6.) The National Union brief also reveals that Duke has a $25 million insurance policy with United Educators Insurance—and contends that any lacrosse case payments should be prorated between the two insurance companies. Since the UE limit of $25 million is five times greater than National Union’s $5 million limit, National Union claims that UE should be liable for 83% (five-sixths) of any insurance payments to Duke, with National Union liable only for the remaining 17%.


Absent more information, it’s hard to speak conclusively on the merits of the Duke-National Union battle. But in its revelations of the March 30, 2006 letter, and that Duke made key decisions without informing its insurance carrier, the filing does provide more insight of Duke’s erratic behavior throughout the lacrosse case.
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Re: Duke Suing Its Insurers in Lax Settlement
« Reply #2 on: January 20, 2009, 02:34:29 PM »

  The insurance company has some very unpleasant things to say about the Duke administration ,about as bad as most of the things that you have been reading on this blog  for sometime.
    Here are both sides of it.
       http://news.justia.com/cases/featured/north-carolina/ncmdce/1:2008cv00854/50149/
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Re: Duke Suing Its Insurers in Lax Settlement
« Reply #3 on: January 20, 2009, 02:51:45 PM »

  http://johninnorthcarolina.blogspot.com/

Tuesday, January 20, 2009
Insurer: Duke’s “allegations … knowingly unfounded, malicious, frivolous, and in bad faith.”

Yesterday KC Johnson posted "Duke's $5M Defense?" which began:

National Union, the insurance company sued by Duke, has filed its response — and the brief makes for interesting reading.

It sure does, as you know if you’ve already read the rest of KC’s post.

If you haven’t, don’t miss it.

After reading National Union’s response (h/t to KC for providing link)I want to add a few comments to what KC says.

First, in the response in which Plaintiffs are Duke University (“Duke”) and Duke University Health System, Inc. (“DUHS”) and National Union is the Defendant, you’ll find on pg. 37:

FIFTH COUNTERCLAIM FOR RELIEF
(Attorneys Fees)

65. The allegations contained in Paragraphs I through 64 of this Counterclaim are realleged and incorporated herein by reference.

66. Plaintiffs' allegations in the Complaint that Defendant's conduct violated N.C.G.S. § 75-1.1 et seq, and constituted violations of the provisions N.C.G.S. §§ 58-63-10 and 58-63-15, are knowingly unfounded, malicious, frivolous, and in bad faith. (emphasis added)

67. Defendant is entitled to recover its costs and its reasonable attorneys fees expended in this action pursuant to the provisions of N.e.G.S. § 75-16.1.

National Union (NU) could not have used stronger, more damning language to describe Duke and DUHS than calling their actions “knowingly unfounded, malicious, frivolous, and in bad faith.”

Charging Duke and DUHS with making “knowingly unfounded” claims is, to take one instance, the same as saying they lied to NU.

NU would not have used the language it did unless it had a great deal of data to support its charges and was confident it could convince the court Duke and DUHS acted in ways that will confirm its charges.

Second, KC notes:

[In a letter dated March 30, 2006] Duke elected to forward to [National Union] “all that is publicly known about the situation at this time.”

But the University knew that at least some of this “publicly known” information—most notably, the claim that the lacrosse players hadn’t cooperated with police, and instead had erected a “wall of silence”—was false.

It’s not clear why Duke would have chosen to pass along information that University officials knew was false, even if that information had appeared in the local and national press.

I’ll venture an opinion as to “why Duke would’ve chosen to pass along information that University officials knew was false, even if that information had appeared in the local and national press.”

Here’s what NU says in its response (bot. pg. 25, top pg. 26):

7. On March 30, 2006 Duke mailed a letter with attached articles to National Union (“the March 30, 2006 letter”). A true copy of the articles attached by Duke to the March 30, 2006 letter is attached hereto as Exhibit A. The March 30, 2006 letter references the 2006 Policy and states as follows:

Please accept this letter and attached documentation as notification of an incident only as required by the policy conditions under the referenced policy. No claim has been made against Duke at this time. Rather than repeat the alleged circumstances, I have attached a number of newspaper articles that summarize all thas is publicly known about the situation at this time.

What the March 30, 2006 Duke and DUHS letter did was use the dodge of “Rather than repeat the alleged circumstances” to avoid telling NU anything they knew about the case that hadn’t yet been reported publicly.

For example, what Duke learned and very likely agreed to on March 29, 2006, at a meeting Duke VP Aaron Graves and DUPD Director Robert Dean attended the previous day with the Durham City Manager, DPD’s Police Chief and Deputy Police Chief, a DPD Attorney, and the two principal DPD investigating officers, Sgt. Gottlieb and Inv. Himan.

I’m sure many of you can think of much else Duke knew March 30, 2006 which wasn’t then public knowledge.

No wonder NU is convinced Duke treated it in ways “knowingly unfounded, malicious, frivolous, and in bad faith.”

Liestoppers has posted on the NU response and included links to it.

Both Liestoppers Meeting here and KC’s post thread have interesting comments concerning NU and Duke. I hope you give them a look.

The Durham Herald Sun's Ray Gronberg reports on the NU response here.

I couldn't find anything about the NU response story in either the Raleigh N&O's print edition or online site; nor could I find anything about it at The Chronicle's site. 
 
     
SC:

   From tthe all the reports coming in,Duke doesn't have a leg to stand on.They can  well end up paying the Lacrosse team out of their own pckets.
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Re: Duke Suing Its Insurers in Lax Settlement
« Reply #4 on: January 20, 2009, 02:57:16 PM »

   No-pay lacrosse insurer: Duke in violation
By Ray Gronberg : The Herald-Sun
gronberg@heraldsun.com
Jan 20, 2009

DURHAM -- Duke University kept its insurer in the dark as it negotiated an out-of-court settlement with three former students falsely accused of rape in the Duke lacrosse case, the insurer says in new court filings.

The insurer, the National Union Fire Insurance Co. of Pittsburgh, says campus leaders thus violated their obligations to the company and therefore let it off the hook for paying the school's legal bills and covering the settlement.

Duke's withholding of information extends even to the terms of its settlement with former players David Evans, Collin Finnerty and Reade Seligmann, the company says.

School officials told National Union they "would not share information" about the settlement because doing so would violate the deal's confidentiality clause, the company said last week in its answer to a breach-of-contract lawsuit filed by Duke.

Moreover, the company said that Duke also violated the terms of its policy by hiring a prominent Washington law firm to defend it from two other lacrosse-case-inspired lawsuits that wasn't among those the insurer had agreed beforehand could represent the school.

Duke sued the insurer in November, seeking a jury trial and both compensatory and punitive damages from the company.

National Union in turn wants a federal judge to let it off the hook for paying Duke's bills or, barring that, to force a second insurer that Duke has a bigger policy with to pay the lion's share of the expense.

The company is an affiliate of the American International Group, the finally troubled insurance consortium the federal government in practical terms nationalized at the height of last fall's Wall Street meltdown.

But National Union's filing indicated that the squabble between it and Duke started well before that -- indeed, that it dates to the early days of the lacrosse case.

Duke notified the insurer in the spring of 2006 that it might need its help by forwarding a letter and copies of several newspaper articles about what proved to be stripper Crystal Mangum's false allegation that three members of the lacrosse team raped her.

The school's insurance policy specified that it was to provide National Union with the "full particulars" of a potential claim.

But the March 30, 2006, letter -- sent out just after Mangum's allegations triggered national controversy -- pointedly omitted details "on the alleged circumstances" and said the newspaper articles summarized "all that [was] publicly known about the situation" at the time, National Union's lawyers said.

A year later, after state Attorney Roy Cooper exonerated Evans, Finnerty and Seligmann, the school wrote the company again to say members of the 2005-06 lacrosse team were considering a lawsuit.

National Union responded by cautioning the school not to "admit or assume any liability" or reach a settlement without first securing the insurer's written consent.

But in June 2007, school officials "verbally advised" National Union that it'd reached and announced a deal with the three falsely accused players. 
 
     
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Re: Duke Suing Its Insurers in Lax Settlement
« Reply #5 on: February 16, 2009, 05:49:30 PM »

   Just in this minute. Thanks ssdgo.
     
  DUKE UNIVERSITY et al v. NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA
http://news.justia.com/cases/featured/north-carolina/ncmdce/1:2008cv00854/50149/

As anticipated, Duke filed an answer to National Union’s counterclaim on February 12, 2009. You won’t be able to follow the response without a copy of the counterclaim handy. So, I suggest you open the counterclaim in one window and Duke’s answer in another.

NU’s Counterclaim, Filing 9 (Note that the counterclaim begins on page 24):

http://docs.justia.com/cases/federal/district-courts/north-carolina/ncmdce/1:2008cv00854/50149/9/

Duke’s Answer, Filing 16:

http://docs.justia.com/cases/federal/district-courts/north-carolina/ncmdce/1:2008cv00854/50149/16/

Enjoy.
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