Mercer County Community College is battling with AIG Claims Inc. in federal court after the insurance company denied coverage for a whistleblower lawsuit filed by the college's head of security.

The college accuses AIG of bad faith and breach of contract for disclaiming coverage for the suit filed by Michael Flaherty, who claims he was falsely implicated for sexual harassment as retribution for reporting that the college failed to comply with Title IX when reporting an indecent exposure incident on campus. AIG, as claims administrator for the $5 million National Union policy, refused to cover the incident because it was related to criminal complaints made by Flaherty before the relevant policy period in which he accused two administrators of coercing a female subordinate to file a sexual harassment complaint against him.

The college sued AIG in Mercer County Superior Court on Feb. 28 and the insurance company removed the case to federal court Wednesday based on the parties' diverse citizenship. MCCC is based in New Jersey and AIG in New York.

MCCC seeks a judgment that AIG Claims is obligated to defend and indemnify the college and its administrators in connection with Flaherty's lawsuit. The college also seeks reimbursement from AIG for attorney fees and costs expended in defense of that case.

AIG said in a disclaimer letter in October 2017 that it denied coverage of Flaherty's civil suit because it was deemed related to criminal complaints he filed in West Windsor Municipal Court in June 2017 against Monise Princilus, executive director of human resources and compliance, and Mark Harris, vice president for finance and administration. The letter cited a policy provision stating that a “subsequent related claim … shall be deemed to have been first made at the time that such previously reported claim was first made.”

But that provision should not apply because the prior criminal proceedings “did not arise from the same facts” as the suit by Flaherty, MCCC claimed in its lawsuit.

Flaherty, in addition to his duties as supervisor of campus security operations, also served as Title IX investigator for MCCC and was responsible for reporting campus crime data to comply with the federal Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act.

In the summer of 2016, Flaherty believed MCCC was not in compliance with certain requirements of the Clery Act. He brought the issue to the attention of his superiors, including MCCC President Jianping Wang. He also said he could not continue in his role as Clery Act compliance officer without additional training. But his reports were ignored and he was denied the additional training needed to renew his Clery Act certification, his suit claims.

In November 2016, Flaherty received a letter from the U.S. Department of Education stating MCCC was noncompliant with the Clery Act due to deficiencies in reporting certain crime data and information about programs designed to increase awareness of sex offenses. Soon thereafter, he sent an email to Wang bringing the noncompliance letter to her attention.

In December 2016, Flaherty received a report from a campus security officer, Jennifer Goddard, that another security officer, Martin Moreno, had texted her an inappropriate sexual request. After an investigation, Flaherty determined it was unclear whether the text message came from Moreno, or if another person sent the message with Moreno's phone while he was attending a party. After the investigation, Goddard issued a complaint against Moreno.

But Goddard allegedly told the Mercer County Prosecutor's Office that Princilus, the human resources director, told her she would not pursue Goddard's investigation against Moreno unless Goddard also filed another complaint against Flaherty over anecdotes of a sexual nature that he shared with her. One anecdote concerned another female employee who had told sexually graphic jokes at work but was offended by a sexually vulgar birthday cake. Another anecdote involved Flaherty buying contraception for his daughter. Goddard resisted filling a harassment complaint against Flaherty but ultimately agreed to do so after Princilus indicated she would not process the complaint against Moreno otherwise, his suit claims.

Then, in February 2017, student Adam Woolf, posing as a staff member, lured some children under the age of 13 into a shower at the college's physical education building and exposed himself to them. Woolf was apprehended by campus security and West Windsor police. The following day, Flaherty told Harris that MCCC would be in violation of the Clery Act if it did not send a timely warning about the Woolf incident to the campus community. But the college did not issue a statement for several days, following coverage in local media.

Flaherty resigned from his position as Title IX investigator after the Woolf incident. In April 2017, Goddard withdrew her complaint against Flaherty. The following month, Princilus issued a memo stating that Flaherty's conversations with Goddard were “in violation of College policy,” without specifying which policy, and directed him to review college policy on harassment. Flaherty claims Princilus and Harris continue to harass him for his complaints that MCCC violated the Clery Act and failed to comply with reporting requirements under Title IX.

His suit claims the college, Princilus and Harris retaliated against him by forcing Goddard to file a fabricated charge of harassment, denying him due process during Princilus' investigation of the harassment complaint, issuing a memorandum indicating that he violated the college harassment policy and refusing to place any documentation in his file indicating that Goddard's complaint was withdrawn.

In an answer to Flaherty's suit, filed in state court March 12, the college, Princilus and Harris generally denied the allegations and said Flaherty suffered no adverse employment action.

Sandro Polledri of Adams Gutierrez & Lattiboudere in Newark, who represents MCCC in the insurance case, declined to comment. Keith Murphy of Gordon Rees Scully Mansukhani in Florham Park, representing AIG, did not return a call.

David Zatuchni of Zatuchni & Associates in Lambertville, who represents Flaherty, did not return a call about the case. Elissa Grodd Schragger of Mason, Griffin & Pierson in Princeton, who represents MCCC, Princilus and Harris in the employment suit, declined to comment.