University to recoup $9.6 million for Robertson case defense

The University is entitled to nearly $10 million in insurance money to cover some of its legal fees in the Robertson case, a New York appeals court ruled on June 5.

The decision requires the National Union Fire Insurance Company to honor the full amount of the policy, which was purchased the same year in which two University-appointed Robertson Foundation trustees suggested the changes in the management of the Foundation's endowment that eventually led the Robertson family to sue the University.

The company had previously only been willing to pay up to a $5 million sublimit on the $15 million policy.

The Appellate Division, First Department of New York's Supreme Court unanimously denied an appeal by the company and upheld a September 2007 decision by Supreme Court Justice Helen Freedman that awarded Princeton just over $9.6 million.

The company argued that the University wanted the funds to fight claims not covered under the insurance policy, but Freedman ruled that National Union had to advance costs for both covered and non-covered claims. In her decision, she specified that National Union may recoup a portion of the policy if it is later determined that the University incurred some of the expenses to defend against uncovered claims. She also observed, however, that, because the University’s legal expenses had already “far exceeded the $15 million limit” and most of the claims were covered, it was unlikely that any apportionment of defense costs would affect the amount of the University’s recovery from the insurer.

University spokeswoman Emily Aronson said in an e-mail that the University was pleased with the ruling but added that the policy will cover only a fraction of the costs the University has incurred in the Robertson litigation.

"The plaintiffs' lawsuit and scorched earth tactics are part of an attempt to seize control of funds their parents chose to give to Princeton, rather than leave to them," she said.

Aronson declined to specify how much the University has spent so far on legal fees in its suit against National Union.

National Union is a wholly owned subsidiary of insurance giant American International Group, whose spokesman, Joe Norton, declined to comment on the ruling.

The insurance policy's role in the Robertson suit

On July 1, 1998, National Union issued the insurance policy to the University. That same year, University-appointed trustees Jay Sherrerd ’52 and John Beck ’53 expressed concern over the Robertson Foundation's reliance on part-time volunteers to manage the ever-growing endowment. They suggested an arrangement in which the Princeton Investment Company (PRINCO) would manage the Foundation's endowment alongside the University's endowment, with continued oversight by the Foundation's investment committee.

William Robertson ’72, the family's single representative on that committee, opposed PRINCO's involvement in the management of the Foundation's assets. Robertson threatened to sue and finally did so in July 2002, a few weeks after the Foundation's board voted to authorize the investment committee's consideration of outside management of assets.

Get the best of the ‘Prince’ delivered straight to your inbox. Subscribe now »

The Foundation's board eventually voted 4-3 in favor of giving control of its assets to PRINCO in November 2003. According to the Foundation's articles of incorporation, the University chooses four of the members of the board of trustees while the Robertson family selects the remaining three.

"The University routinely buys and renews a myriad of insurance policies," Aronson said when asked why the University purchased the policy in July 1998. "While we don't discuss the merits of each decision, in general we purchase insurance to protect the University's assets," she added.

The Robertson family alleges that Princeton has misused the Foundation's funds by ignoring the intent of the late donors, Charles Robertson '26 and his wife Marie. Though the Robertsons claim that the University has failed to adequately place Wilson School graduates in federal government jobs, especially those in foreign policy, the University maintains that it does an adequate job of placing graduates in the public sector.

Together, the two sides have spent $50 million in legal fees since the suit was filed in July 2002. The trial to determine who will control the Robertson Foundation's $880 million endowment is scheduled to begin on Oct. 1.