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The Business of Risk Management

Understanding coverage needs to proactively mitigate risks in districts large and small
The above chart, from United Educators’ “2011 Public Schools Claims Report,” shows the dollar cost of claims for each category of bodily injury among district employees across the nation. (Click to enlarge)
The above chart, from United Educators’ “2011 Public Schools Claims Report,” shows the dollar cost of claims for each category of bodily injury among district employees across the nation. (Click to enlarge)

A few years ago, San Francisco USD had questions about the hundreds of community-based organizations teaching reading to students and growing school gardens, among a wide range of other activities.

Administrators wanted to know the risks of outside groups using school facilities, says Dorothy Gjerdrum, the senior managing director of public sector practice at Arthur J. Gallagher & Co.

They needed to consider contract risks and insurance, issues beyond workers’ compensation, and professional liability. And, administrators needed to conduct background checks to ensure volunteers didn’t have a criminal record, needed to confirm proper insurance coverage for services, and needed to define and limit when and which volunteer services were being offered.

So the superintendent’s office met with district principals and legal staff to define the protocol to best manage perceived risks to protect students, educators and the schools. And the district’s risk manager had to ensure principals were following protocol.

Type of risks

Compared to the early 1990s, district leaders must focus more on safety drills, surveillance, building security and other tactics, says Robin Mullins, director of business services for Fairbanks North Star Borough School District in Alaska and an ASBO International risk management committee member.

A growing trend of assaults involving student-on-student and faculty-on-student seems to have raised assault-related insurance premiums, says Andreas Dangin, a risk management consultant for United Educators (UE, which provides coverage for general liability, auto liability and school board leaders’ liability.

About 75 percent of UE’s assault claims between 2005 and 2009 were of a sexual nature—many involving adult suspects and student victims, UE reports. “School employment practice liability claims and lawsuits are bigger than they had ever been with the uptick trends in child abuse—especially in special education departments,” says Stacy Corluccio, academic director for risk management programs at the National Alliance for Insurance Education & Research.

Learning to individualize risk control

District leaders should keep in mind a few tips:

  1. Investigate activities: Examine off-campus school trips to ensure the most appropriate level of liability coverage and district or parental insurance needs. For example, if a class canoe trip is being planned across an open body of water, teachers and administrators need to be aware of risk guidelines-—such as restrictions due to water levels and safety equipment and procedures.
  2. Collaborate: Work with insurance and liability providers on risk management training for district personnel to lower the likelihood of claims, such as through online courses on workplace harassment or on safely teaching science
  3. Focus: Pay attention to more frequent compliance inspections on buildings and risk management policies with liability carriers as a proactive way to alleviate claims.

And Dangin adds that school administrators must prepare for secondary costs associated with workers’ compensation claims, such as paying for substitute teachers, losing productivity and employees’ overtime costs.

Insurance companies are generally lowering limits on fire, windstorm and water coverage, says Dangin, also a former risk manager for Prince George’s County Schools. He has seen more underwriters requiring annual building inspections during his 10 years working in Prince George’s County, in addition to them inspecting more of the district’s 263 locations throughout the year. There is more focus on loss prevention and compliance on district building’s boilers, structures and fire suppression and alarm systems.

Given technology concerns, cyber- security is not covered by property liability policies. However, cybercrimes are considered a specific kind of loss related to electronics, says Gjerdrum of Arthur J. Gallagher & Co.

While cybercrime attacks can be disruptive, cybersecurity accounts for just 2 percent of the coverage at Fairbanks North Star Borough School District, which has a $25 million liability policy with a 175-school co-op, says Mullins. Enforcing proper school technology policies for each risk and potential behavior can reduce losses and coverage costs.

Risk managers must be aware of what it takes to hold an after-school dance class, for example. “Even having a Zumba class in the school requires signing a waiver of liability that it would not be a workers’ compensation case if people injure themselves,” says Brad Goldstein, associate superintendent of finance and business operations for Hawthorn District #73 in Illinois and an ASBO International risk management committee member.

Risk managers

Some states, such as Florida, require each district to have a risk manager. But funding constraints have driven more districts to eliminate risk managers and spread the function among other personnel, such as the business manager, says Corluccio.

Being up-to-date on the research and best practices through resources such as UE’s EduRisk Learning Portal can help administrators be more aware of critical topics, says Constance Neary, vice president for risk management at United.

For instance, eliminating a blanket ban on hiring anyone with a criminal record or poor credit can allow qualified candidates, who might have only a minor infraction on their record to explain their past.

Train everyone

Ideally, a risk manager should educate district employees and local organizations about how they can help reduce liability scenarios and engage them in the risk assessment process, says Gjerdrum.

Crunching claims numbers

In its 2011 Public School Claims Report, United Educators analyzed more than 1,300 liability claims it had filed on behalf of public K12 schools between 2005 and 2009. The main points of the report showed:

  • While students brought 63 percent of all claims against the public schools, the claim totals accounted for only 48 percent of total claim costs.
  • Even though third-party claimants submitted 19 percent of claims—many of which were visitors’ slip and fall submissions, the claims were much costlier at one-third of the total dollars paid.
  • Athletic practice injuries accounted for two out of 10 claims, and one in 10 occurred during sports competitions.

Risk managers should inform educators about coverage requirements for field trips with students, for example. Incorporating educational components­—such as indoor floor safety or concussion prevention and identification—into district personnel training can help reduce overall costs of risks and prevent losses.

“The biggest hurdle for me was the little amount of time available for risk management training under the various union contracts,” says Dangin.

For example, Prince George’s schools has no designated time for learning about risk management among its employees. And Maryland’s Calvert County Public Schools avails only three hours per year for online compliance training for all teachers—which is not necessarily dedicated just to the subject of risk management and how to avoid it.

Varying costs

Risk management costs can vary depending on the region, weather, amount of prior claims and number of programs outside of school campus, such as field trips. In the Broward and Miami-Dade districts in Florida, wind damage from hurricanes can be a major risk. Both districts must have complex levels of coverage more commonly seen with a Fortune 500 company, Gjerdrum says.

While one carrier may insure for $1 million to $5 million, another will insure the next coverage layer from $5 million to $25 million, and so on. But in a group of smaller schools with similar coverage needs in Iowa—an area which faces the threat of tornados—district leaders can group-purchase insurance to get better coverage and pricing.

More districts are opting to keep policy premiums lower by increasing their self-insured deductible, Mullins says. They generally budget money to pay for liability losses, auto liability and workers’ compensation rather than lean on insurance companies.

The average $150,000 claim risk coverage on self-funded health plans in districts has jumped up to around $350,000 this year and is expected to average $375,000 next year to cover the increased amount of claim costs, Mullins says.

Risk control

The Washington Schools’ Risk Management Pool, which provides direct liability and property coverage for 124 districts, recently examined its prevention program’s influence on the claims it received. In 2010, employment liability claims and inadequate work/negligent action claims had risen from 101 in 2002 to a high of 240 eight years later.

In response, a two-pronged proactive plan was created to reduce claims and premiums. Risk assessment surveys were designed to better educate member staff and students, says Deborah Callahan, WSRMP’s deputy executive director.

Members were also eligible to receive up to $15,000 per case to pay for an independent investigator to examine termination, harassment and discrimination allegations. As a result, the number of claims dropped to 26 in March 2014.

“Risk management needs to be a lens through which the risk manager and all personnel need in order to look at the district’s decisions,” says Damon Brown, director of human resources and risk management for St. Vrain Valley School District in Colorado.

Ariana Rawls Fine is newsletter editor.

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