United States: Service Of Subpoenas On Syracuse University Seeking Evidence Of Sexual Molestation Is A "Claim" Giving Rise To Covered Defense Costs According To New York State Court

Last Updated: April 2 2013
Article by Richard C. Mason

In Syracuse University v. National Union Fire Insurance of Pittsburgh, PA, No. 2012EF 63 (Sup. Ct., Onondaga County, January 29, 2013), the New York Supreme Court, County of Onondaga, held that an insured's costs incurred in responding to subpoenas issued by state and federal agencies, were covered (as defense costs) as "Claims" made under a not-for-profit individual and organization insurance policy issued by National Union. The case arose out of allegations that a Syracuse assistant basketball coach, Bernie Fine, had sexually abused two former participants in Syracuse University's basketball program over a period of years while serving in his capacity as the University's assistant basketball coach.1 The court held that issuance of the subpoenas constituted a "Claim" as defined in the policy.

Service of Multiple Subpoenas

According to the declaratory judgment complaint, in late 2011 and early 2012, Syracuse University received multiple subpoenas in connection with state and federal investigations relating to the allegations against Fine. The federal subpoenas required production of, among other things, computer equipment possessed by Fine, a list of all secretaries who had worked for him, a list of his hotel accommodations while traveling with the basketball team in 2001 and 2002, and bus services known by plaintiff to provide transportation to away games during that period. Further, the federal subpoenas sought records relating to any complaints made about Fine, internal documents relating to how Syracuse responded to such complaints, and documents concerning communications occurring after November 17, 2011, when Fine was suspended by Syracuse. Also, significantly, a subpoena sought documentation that post-dated Fine's departure, which referenced communications relating to the topics of Joe Paterno, Jerry Sandusky or the scandal related to the Penn State University football team and allegations of child molestation by Sandusky. In addition, one subpoena sought any and all complaints regarding Fine, telephone logs for any telephone calls made or received by Fine, as well as documents and records relating to Syracuse men's road games, meet and greet sessions, and any videos for the games.

Court Holds That Service of a Subpoena May Be a Claim

After Syracuse sent National Union copies of the subpoenas, National Union advised Syracuse that its costs in responding to the investigation subpoenas were not covered under the policy, which defined "Claim" as:

1. A written demand for monetary, non-monetary, or injunctive relief; or

2. A civil, criminal, administrative, regulatory, or arbitration proceeding for monetary or non-monetary relief which is commenced by:

(i) service of a complaint or similar pleadings; or

(ii) return of an indictment, information or similar document in the case of criminal proceeding; or

(iii) receipt or filing of a notice of charges ...

National Union denied that the circumstances relating to the subpoenas constituted a "Claim" under the policy. After an exchange of letters, Syracuse filed suit on August 22, 2012.

The court concluded that the grand jury's investigations and the subpoenas met the first prong of the "claim definition," constituting a "written demand ... for non-monetary relief," and the investigations also satisfied subparagraph 2 of the claim definition, as "criminal proceedings for monetary or non-monetary relief which [are] commenced by: ... (ii) return of an indictment, information or similar document ...."

The court supported its conclusion that the subpoenas were a "demand" with the observation that, under New York and federal law, failure to comply with a grand jury subpoena is punished by fine or imprisonment as contempt of court. Relatedly, Black's Law Dictionary defines "relief" as the "redress, or benefit, esp. equitable in nature (such as injunction or a specific performance) that a party asks of a court — also termed remedy." Deeming the term "remedy" to be defined broadly as the "means of enforcing a right or preventing or redressing a wrong," the court concluded that a subpoena is a grand jury's means of preventing or redressing a wrong. "The relief sought by a subpoena is the production of documents or testimony," which the court considered non-monetary relief. The court emphasized that when a district attorney issues and serves a subpoena, a proceeding "is instituted in the grand jury, just as in an analogous situation a civil action is commenced by the service of a summons."

A Subpoena May Refer to a "Wrongful Act" Even if the Insured Is Not a "Target"

The court rejected National Union's argument that for a "Claim" to arise, an insured is required to prove that it was a "named target" of an investigation. The court observed that the duty to defend arises when there are any allegations bringing the claim even potentially within the protection that was purchased. While the bulk of the inquiries in the subpoenas dealt with Fine, and not directly with Syracuse University, any liability on the part of Syracuse necessarily depended upon Fine's culpability. The allegations against Fine related closely to the operation of Syracuse's basketball program and Fine's actions. Accordingly, although Syracuse might not have been the target of the grand jury investigation at the time the subpoenas were issued, that fact would not prevent prosecutors from bringing charges against Syracuse based upon information obtained through the subpoenas.

Liberal Interpretation of the "Wrongful Act" Requirement

In addition, the court rejected National Union's argument that the subpoenas did not reference a "wrongful act" by the university. The court reasoned that even if the subpoenas contained no facts or allegations of a wrongful act on Syracuse's part, their inquiries could still "potentially" fall within "the protections purchased in the insurance policy" so the court could not find that "there may be no possible factual or legal basis upon which [the insurer] would be required to indemnify the [insured]." In this regard, the court thought that the most significant aspect was that a single question in the U.S. attorney's subpoena sought information about events and transactions between Syracuse employees and the police, as well as "internal documentation occurring after Fine's departure regarding the scandal related to the Penn State University football team and allegations of child molestation by former assistant coach Jerry Sandusky." The court regarded this question as aimed at determining whether Syracuse was engaged "in an institutional cover-up of Fine's alleged misdeeds, similar to that of Penn State, and was thus engaged in a breach of duty." Therefore, even if Syracuse was not a formal target of the subpoena, the subpoena sought facts within the meaning of a policy's definition of wrongful acts, i.e., "any breach of duty, neglect, error, misstatement, misleading statement, omission or act by or on behalf of the organization." Accordingly, the information sought met the standard of a "potential claim," which implicated coverage, given that it could not be said there was no possible factual basis upon which National Union would eventually be obligated to indemnify Syracuse.

The court concluded that National Union owed Syracuse a duty to defend with regard to its defense of and responses to the subpoenas. It followed from this that National Union was obligated to indemnify Syracuse for its defense costs, which allegedly totaled several million dollars.

Conclusions and Observations

The Syracuse University decision is important for several reasons. First, the court conferred a broad meaning upon the "Claim" definition, holding that a subpoena was a "demand for relief." Second, the court held that a subpoena was not a mere discovery device, but rather was the legal equivalent of an indictment or a notice of charges, thus constituting the commencement of criminal proceedings within the meaning of the "Claim" definition. Third, the court held that a subpoena relating primarily to an employee of the insured constituted a "Claim", whether or not the insured was the target of the investigation. Fourth, the court gave a broad reading to the question of whether the subpoenas referenced a wrongful act, finding that a single question within one of the subpoenas that could relate to a wrongful act by Syracuse triggered the "Claim" provisions under the policy.

The decision, however, may have some utility for insurers. The court's understanding of prosecutorial investigation methods may support an insurer's view that a "Claim", based upon the issuance of a subpoena, was made prior to the policy period. Insurers to whom a claim is first reported during the policy period, relating to a subpoena issued prior to the policy period, may cite the Syracuse University decision to support a position, in appropriate cases, that the claim was made prior to the policy period.

Claims personnel to whom a claim is submitted following issuance of a subpoena will need to obtain a thorough grasp of the applicable state or federal prosecutorial regimes governing the subpoenas in question. In the Syracuse University decision, the court undertook a granular inquiry into the circumstances under which New York state attorneys general and federal attorneys general issue and employ subpoenas and investigate suspected criminal offenses. Determining whether issuance of a subpoena constitutes a "Claim", therefore, may in many cases require an informed analysis of the statutory liability to which the insured may be subject, and the procedural authority under which the subpoenas were issued.

Footnotes

1 Fine denied any wrongdoing, and ultimately, the investigations were concluded without bringing any charges.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions