Education Industry Facing Unprecedented Insurance Challenges

In early 2020, before most Americans became familiar with the word “coronavirus,” a different risk loomed over the education industry as its No. 1 threat: sexual abuse and molestation. And while COVID-19 has since become the most top-of-mind issue for schools ranging from grades K-12 to colleges and universities, for private and charter K-12 schools in particular, sexual abuse and molestation remain an even more dangerous risk.

Like every industry, higher education is faced with a hard market for Property and Casualty insurance. Unlike some industries, the hard market is clobbering educational institutions on every line of coverage: General Liability, Cyber, Employment Practices, Professional Liability, Property – all in addition to Sexual Abuse and Molestation. You name it, the education industry is taking it on the chin from all directions – rates, availability, capacity and underwriting scrutiny/selectivity.

Yet even as education administrators at all levels deal with the day-to-day challenges of COVID-19, it’s the long-term risks of sexual abuse and molestation that pose an existential threat.

‘Reviver Laws’ and Coverage Exclusions

A January 2020 report by The Oregonian on an exclusive private school at the center of a large sexual abuse scandal noted how widespread and damaging the problem of abuse and molestation is among private institutions. That, as the report underscores, has made underwriters increasingly wary of insuring private schools:

“Schools of all sorts from all over the country have been hit hard by sexual abuse claims. That includes some of the best-known names in private education – from the Brentwood School in Los Angeles to St. Ann’s School in Brooklyn.

“In response, insurance companies have retreated from the private school business. Insurers remain eager to sell standard liability policies. But they often refuse to cover sexual abuse claims.

“’​Many insurers are adding explicit exclusions in their general liability policies,’ said Ed Hancock, chief underwriting officer at Church Mutual Insurance Co. ‘Sexual misconduct is not an accident from the standpoint of the perpetrator, and traditionally general liability insurers are comfortable insuring accidents.’”

Adding to insurers’ reluctance to underwrite coverage for sexual abuse and molestation is the growing number of states with “reviver laws,” which expand the window for filing claims. In New York, for example, Gov. Andrew Cuomo in February 2020 signed into law that raised the age limit for filing a felony charge of abuse from 23 to 28 and extended the age of victims who can seek civil relief against abusers and enabling institutions to 55.

In an August 2020, Business Insurance report, Vicky Riggs, a senior financial analyst for A.M. Best Co. Inc., said the extended time frames for seeking compensation would likely increase insurer exposure. “And definitely because of the sensitivity of the subject, I believe there will be more likelihood of settlement versus extensive litigation,” she added.

For schools, organizations and institutions serving young people – and for the carriers who underwrite liability coverage – the extended time frames require a long-range view of sexual abuse and molestation risks. Both insured and insurer should be looking 50 years ahead.

To reiterate a conclusion found in Alera Group’s whitepaper Property & Casualty 2021 Market Outlook: “A limited number of carriers are writing liability for higher education institutions. When offered, limits are low. Insurers are adding exclusions for sexual abuse and molestation, and for traumatic brain injury risks, which can result in claims in excess of $1 million.”

Outlook Heading into 2021

Here’s the overall landscape for the education industry as outlined in Alera Group market outlook:

► Rates are increasing and capacity is decreasing: The insurance market for educational institutions has been steadily hardening over the last several years, and COVID-19 has added to the pressure. All sectors of education are affected, but the greatest impact is on colleges and universities.

► Jury awards and the cost of defending lawsuits are skyrocketing: Schools are expected to protect students against “everything,” from bullies to injuries suffered while playing competitive sports. When schools fail to keep students safe, the consequences can be enormous. Hundreds of millions of dollars have been paid out by and on behalf of educational institutions. The frequency and size of claims has made underwriters guarded about primary and excess liability for educational institutions.

► Sexual Abuse and Molestation claims are cause for concern: The market for this coverage is difficult, especially in states where immunity is limited for school districts. Compounding the challenge for underwriters are newly enacted “reviver” laws that may leave insurers responsible for historical claims that were previously deemed beyond the statute of limitations.

► Underwriting is highly selective: Given the level of risk educational institutions face, insurance companies are reluctant to consider an account with any “hair on it.”

► Communicable disease exclusions on the rise: Educational institutions have a huge exposure to COVID-19. Insurance companies want to limit their liability for unknown risks.

 

To obtain the entire Property & Casualty 2021 Market Outlook whitepaper, click the button below.

GET THE WHITEPAPER

Big Issue on Campus

While there’s no good time for a pandemic, for the education industry, COVID-19 couldn’t have arrived at a worse time. As the publication Risk & Insurance reported in late November:

“In addition to the hard market, higher education is facing its own unique challenges, from recent high-dollar jury settlements for sexual assault and misconduct involving students, coaches and faculty plaguing many institutions to concerns about campus safety, health, security and reopening plans amid COVID-19.”

Higher education officials who had hoped the trials, errors and successes of navigating a pandemic last fall would result in return to normalcy this spring are now confronting a harsh reality. While many students are back on campus or planning to return soon, ongoing struggles with COVID-19 mean that normalcy isn’t returning to campus anytime soon.

Here’s a recent sampling from the Inside Higher Ed webpage Live Updates: Latest News on Coronavirus and Higher Education:

• January 18: One week after students returned to classes, New York’s Union College imposes a campus quarantine to deal with an immediate spike in COVID-19 cases – 51 since January 1.


• January 19: The dean of Massachusetts’ Amherst College reminds students via email that there will be no outdoors social events, as there were in the fall, and that students living on campus will not be allowed to visit off-campus houses.


• January 20: The University of Alabama announces that it mistakenly sent 7,500 emails telling people they had tested negative for COVID-19. This occurs eight days after the university gives faculty the option of teaching remotely as a precaution following the mass (and largely mask-less) celebration that took place after Alabama’s victory in the NCAA football championship game.


• January 21: The Houston Chronicle reports that a student at Rice University has sued the school for charging full tuition despite most of its education taking place online. The suit, which seeks to become a class action, read, “Plaintiff and the members of the class have all paid for tuition for a first-rate education and on-campus, in-person educational experiences, with all the appurtenant benefits offered by a first-rate university. Instead, students like plaintiff were provided a materially different and insufficient alternative, which constitutes a breach of the contracts entered into by plaintiff with the university.”

Of course, liability issues arising from COVID-19 and education aren’t confined to colleges and universities.

In December, when parents in the Chicago suburb of Park Ridge, IL, questioned local board of education members about why their school district was not offering full, in-person learning, the district’s legal counsel cited a letter from the school’s insurance provider. School districts, the attorney said, would not be covered for legal fees or damages caused by a “COVID-related incident.”

“As soon as those letters were sent out to many districts, that’s where the risk of liability became very real,” the attorney told attendees during a virtual board of education meeting covered by the Chicago Tribune.

Additional Considerations

The Property and Casualty challenges facing the education industry don’t end with abuse and COVID-19. Cyber Liability coverage remains widely available, but their vast number of cyber integrations make educational institutions especially vulnerable to breaches. Claims continue to rise, and increased dependency on remote learning only adds to the risk.

In every other line of coverage for education, the market is trending unfavorably for buyers across the board – availability, rates, capacity and underwriting/selectivity. These lines of coverage include:

• General Liability


• Employment Practices Liability


• Professional Liability


• Property


• Umbrella/Excess.

What You Can Do

Protecting your organization with a cost-effective insurance program should be a proactive process. Here are some steps you can take:

• While risk management is always a key component element of containing insurance costs, it can’t be emphasized enough given a combination of hard market and heightened risks.


• Work closely with a knowledgeable, independent agent/broker who serves as a trusted adviser. In addition to marketing your organization to multiple carriers for the best available premium and limits, as well as the fewest possible exclusions, such an adviser will ensure you have the resources and services to make your risk management program comprehensive and effective.


• Watch Alera Group’s  “COVID-19 Vaccines & More: Practical Guidance for Employers.” During the presentation, you’ll receive information on regulations regarding vaccines, along with guidance on safe and effective work practices. Topics include:
  
  
  
  • Incorporating updated Families First Coronavirus Response Act (FFCRA) and other regulations into your policies and practices
  
  
  • Considerations for developing vaccination policies
  
  
  • Adapting short- and long-term remote and on-site workforce strategies.
  
  
  
  

The last segment of the webinar is devoted to a panel discussion featuring Alera Group HR experts and leaders of medium- and large-sized companies who are managing COVID-19 on the front lines across multiple industries and states.

VIEW THE WEBINAR

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About the Author                             

Michael Brooks, CRSM

Executive Vice President

Austin & Co., Inc., an Alera Group Company

A Certified School Risk Manager (CRSM), Mike oversees the commercial lines, claims and personal lines departments of Austin & Co. Inc., with responsibilities for product management and carrier to relationships, while maintaining a large and varied client base.

Contact information:

• mbrooks@austin-co.com


• (518) 431-7077