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.

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