Syracuse University and National Union Fire Insurance Company recently settled a much-watched coverage battle over National Union's obligation to cover Syracuse's costs in responding to grand jury subpoenas. Fortunately for policyholders, National Union's decision to settle came after Syracuse prevailed in the trial and intermediate appellate courts, yielding a pro-policyholder decision that such subpoenas fall squarely under the definition of "claim" under common policy language.
The dispute between Syracuse and National Union arose out of the well-publicized sexual abuse allegations made against former Syracuse assistant basketball coach Bernie Fine by two former "ball boys" for Syracuse's famous basketball program. After these allegations came to light, Syracuse was served with a series of six subpoenas in connection with state and federal grand jury investigations. The subpoenas demanded that Syracuse produce a wide range of documents and other materials, including electronic equipment issued to Fine, lists of bus companies and hotel accommodations used by Fine for team road trips.
Syracuse provided notice of the subpoenas to National Union – which had insured Syracuse under a not-for-profit individual and organization liability policy – but National Union denied coverage on the grounds that the subpoenas did not constitute "claims" under the policy and did not involve alleged "wrongful acts" against Syracuse. The trial court rejected these arguments, and granted partial summary judgment to Syracuse. In a one-page opinion, the appellate court affirmed the trial court's decision and fully endorsed its reasoning.
The National Union policy defined a "claim" to include a "written demand for monetary, non-monetary or injunctive relief" or "a civil, criminal, administrative, regulatory or arbitration proceeding for monetary or non-monetary relief..." The trial court found that the grand jury subpoenas fell squarely within this definition because they constituted a demand for non-monetary relief and the initiation of a criminal proceeding. In reaching this conclusion, the court relied in part on a decision from the Second Circuit in MBIA, Inc. v. Federal Ins. Co. which had similarly held that a subpoena from the New York State Attorney General's office constituted a claim under similar policy language. The court flatly rejected the insurer's argument that a subpoena is nothing more than a "discovery device," noting that a sensible businessperson would not perceive a grand jury subpoena in such a harmless and limited fashion.
The court also rejected National Union's argument that Syracuse had no coverage for the subpoenas because it was not a named target. Applying the well-settled rule that an insurer has a duty to defend so long as the claim involves any facts or allegations that potentially fall within coverage, the court held that the subpoenas triggered the insurer's defense obligations. The court noted that the subpoenas clearly sought evidence against Syracuse, not just Fine, as they explicitly requested emails sent after Fine had been terminated, suggesting authorities were looking into whether Syracuse tried to keep the allegations from coming to light.
Insurers will no doubt advocate a cramped reading of Syracuse University v. National Union Fire Insurance Company, contending its holding is limited to the precise definition of "claim" in the National Union policy and the case-specific facts surrounding the subpoenas in question. However, the Syracuse decision has broader implications. Combined with the MBIA decision, Syracuse provides further support to policyholders in their efforts to obtain coverage for the often substantial costs incurred in responding to subpoenas issued by investigative bodies.
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