Princeton U. Takes AIG To Court Over Legal Fees

Princeton University is awaiting a judge's final ruling concerning how much American International Group must pay the school to cover legal fees from a protracted legal battle over an endowment.

The university sued the New York-based insurer and its subsidiary, National Union Fire Insurance Company of Pittsburgh, when the company said it would pay no more than $5 million to cover defense costs. The university has a $15 million policy.

Princeton has accumulated more than $18 million in legal expenses and more than $4 million for expert witnesses in its litigation with family members of the Robertson Foundation, said Lauren Robinson-Brown, Princeton communications director.

AIG argued that the $15 million not-for-profit policy was written with three $5 million sublimits for individual insurance, organization indemnification reimbursement insurance and organization entity coverage.

While the insurer paid $5 million to the university for legal costs, AIG said it was not liable for paying the remaining $10 million portion of the policy because of an "insured versus insured" exclusion and that the action is "equitable in nature."

An April 23 decision by New York Supreme Court Judge Helen E. Freedman in Manhattan rejected AIG's arguments on these points. She said the "insured versus insured" clause would only apply if one member or group of members on the trustee board were suing one another.

Judge Freedman rejected the "equitable in nature" argument, finding that the argument only applies when the plaintiff is seeking more than monetary remedies to compensate for a loss. She added that the university's legal expense has far exceeded the $15 million policy.

However, according to the decision, the judge did find that the insurer can apportion the $15 million between the sublimits.

Ms. Robinson-Brown said the parties are awaiting further direction from the court, but she declined to say if it was specifically for the apportionment.

According to court documents, the family of Charles and Marie Robertson, who established the endowment, accused Princeton of improper expenditures--allegedly spending money from the trust for purposes other than supporting the graduate program of the Woodrow Wilson School of Public and International Affairs.

The family is seeking to remove the trust, valued at $840 million, from the university. The family said it intends to use the money elsewhere in keeping with the original intent of the gift.

Their suit, filed in 2002 in Chancery Division of the Superior Court of New Jersey in Mercer County, has made national headlines as other institutions of higher learning are concerned it could set a precedent over future control of their endowments.

Princeton's endowment is more than $14.2 billion, Ms. Robinson-Brown confirmed.

Joseph Norton, a spokesman for AIG, said the company does not comment on ongoing litigation.