In some industries, a business or organization seeking liability insurance may have a hundred carriers willing to write coverage. In the education industry, the number of insurance companies willing to even consider issuing a liability policy is more likely to range from three to five.
Even then, coverage for some risks — especially contagion and sexual abuse and molestation — is almost certain to be off the table. Cyber Insurance is nearing that territory, and Employment Practices Liability Insurance (EPLI) isn’t far behind.
It’s gotten to the point where insuring a school may be more difficult than gaining admission to MIT or Stanford.
Why? For one thing, while no industry is immune from litigation, schools are especially vulnerable. This was the case before the emergence of COVID-19, largely due to so-called “nuclear verdicts” in sexual abuse and molestation cases, and the pandemic has made matters exponentially worse.
In a November 2021 article titled “Schools in Most States Are Shielded From COVID Lawsuits. It May Not Help,” Education Week reported: “School districts have faced lawsuits on a wide variety of issues during the pandemic: for requiring masks, for failing to require masks, for mandating vaccines. One district in West Virginia is facing a lawsuit for permanently closing several school buildings, thus increasing bus time and potential COVID exposure for some students.”
And the litigation trend shows no signs of abating.
No. 1 Issue: Sexual Abuse and Molestation
Lawsuits related to claims of sexual abuse and molestation remain an even greater challenge than COVID issues, as current or recent cases involving schools ranging from the elementary level to prestigious universities demonstrate. In February 2022 alone:
These follow on the heels of a complicated lawsuit filed in late 2021 by former students at the University of North Carolina School of the Arts. According to the New York Times, “A total of 56 former arts students say dozens of teachers and administrators participated in, or allowed, their sexual, physical and emotional abuse when they were in school. Overall, the misconduct spanned more than 40 years, beginning in the late 1960s, according to the lawsuit, and included assaults in classrooms, private homes off campus, a motel room off a highway, and a tour bus rumbling through Italy.”
Lawsuits over sexual abuse and molestation that allegedly took place decades ago are possible due to “reviver laws,” which expand the window for filing claims and have been adopted by a growing number of states. 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. When placing coverage, both the insured and the insurer should be looking 50 years ahead.
Market Outlook for 2022
Looking ahead in the shorter term, here’s what Alera Group had to say about insurance for the education industry in our Property and Casualty 2022 Market Outlook:
“Insurers will continue to increase rates, reduce coverage and scrutinize the business they write. COVID-19-related suits and reviver laws which have opened the statute of limitations on sexual abuse and molestation claims are key risk concerns for insurers. Factors influencing the market include:
- Few options. From daycare centers to colleges and universities, there is a limited number of companies that will insure educational institutions. Unfortunately, several high-profile insurers who used to handle this type of business have exited the market.
- More risk. Schools continue to grapple with the challenge of keeping students safe. Though many schools have gotten better at mitigating risks such as traumatic brain injury and abuse, legislative and societal changes continue to increase claims frequency and cost.
- Social media is increasing the risk of one-on-one abuse, and social inflation is driving up claim awards. Bullying and abuse are not new issues for schools, but the threats seem to be intensifying, with greater public attention being paid to the harmful effects.
- Increasing claims and nuclear jury verdicts are leading to more conservative underwriting. Losses are growing in frequency and severity, and much is still unknown about claim development. Expect insurers to ask more questions, make more demands and exclude coverages such as Communicable Disease, Sexual Abuse and Molestation, Law Enforcement-Civil Unrest, and Traumatic Brain Injury.
- Employment Practices Liability claims are a growing risk for educational institutions. The most frequent claims include wrongful termination, sexual harassment, discrimination and retaliation.
- Educational institutions are a prime target for cyberattack. Some insurers have identified education as a restricted business class within the cyber market and will no longer write this business. Carriers offering Cyber Insurance will be highly selective in how they use their capacity.
- Lead/Excess Umbrella and Educators Legal Liability will be extremely challenging. Due to heavy losses, capacity is shrinking as fewer insurers want to write the business. Expect to see reduced available limits, higher deductibles/retentions, and double-digit rate increases.
- The use of alternative risk solutions is increasing. As rates increase and coverage is more restrictive, captives and risk-purchasing groups are becoming more attractive to buyers.”
Multiple EPLI Challenges
Administrators at all levels of education know how difficult it can be to fire a bad employee, and that growing reality is making it very difficult for schools to obtain Employment Practices Liability Insurance.
The few carriers who will insure K-12 also insure institutions of higher education, and trends in higher-ed tend to trickle down. Institutions of higher education tend to do a poor job of firing transgressive employees, largely because of the success other fired higher-ed employees have had in litigation.
As a result, we’re seeing more employment practices litigation in K-12 than we did a decade ago — including lawsuits by current or former students (or fellow faculty) claiming they were victimized by an instructor who should have been fired, and by fired instructors claiming wrongful termination. For an example of the latter, see the case of a former Pittsburgh teacher who sued a school district and its board after she was dismissed for reasons including a shared Facebook post.
Ransomware and Cyber Insurance
Speaking of online platforms, what would a discussion of education industry insurance challenges in 2022 be without further addressing cyber exposures, particularly ransomware?
In December 2021, Inside Higher Ed reported, “Ransomware attacks are skyrocketing at a time when many colleges are finding they can’t afford Cyber Insurance — or even get it … An estimated 82 colleges and public school districts have been the victims of cyberattacks so far this year, disrupting learning at more than 1,000 individual institutions and schools across the country, according to the cybersecurity company Emsisoft.”
Yet as difficult as obtaining Cyber Insurance is, it may not be impossible, as Alera Group reported last month: “Today, stricter underwriting guidelines require having certain cybersecurity protocols in place as prerequisites for coverage, and they typically necessitate stacking policy layers — Excess Insurance atop the primary policy — to provide full coverage. Many carriers also are requiring coinsurance, with policyholders responsible for paying a percentage of any ransomware claims, usually from a reserve fund created for that purpose.”
What You Can Do
Designing such complex coverage requires high-level expertise in both insurance and the education industry, along with a deep understanding of the institution or school district being insured. A qualified agent or broker will work with you to present your school to an insurance underwriter in the best possible light — with thorough, clear documentation of your risk management program, claim history and financials.
For a more in-depth look at strategies for navigating P&C market conditions in general and for the education industry in particular, read Alera Group’s Property and Casualty 2022 Market Outlook. In the Outlook, you’ll also find valuable information on factors driving the current P&C market, along with analysis categorized by industry and lines of coverage.
To obtain the whitepaper, click on the link below.
GET THE MARKET OUTLOOK
About the Author
Michael Brooks, CRSM
Executive Vice President
Austin & Co., Inc., an Alera Group Company
A Certified School Risk Manager (CRSM), Michael oversees the commercial lines, claims and personal lines departments of Austin & Co. Inc., an Alera Group Company, with responsibilities for product management and carrier relationships, while maintaining a large and varied client base.