Duke Sues AIG on Cost of Stripper Dispute With Lacrosse Players

By Erik Holm
Bloomberg News
December 18, 2008

Dec. 18 (Bloomberg) -- American International Group Inc. was sued by Duke University 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.

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

Prosecutor Disbarred

The three players were indicted in April 2006 after Durham County District Attorney Michael Nifong concluded a month-long 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 dropped the charges, and Nifong was disbarred for unethical conduct as a result of the 2006 investigation.

The 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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