INTRODUCTION

Each school has its own academic calendar with set start and end dates and operates within specific time frames. Missing the first day of the term means losing income for the entire term. Additionally, concerns about not opening on time can lead to significant business income loss.

Example: The Foxfire Academy school year typically starts in the last week of August. However, due to a fire over the summer, the school cannot open until November. This situation makes prospective students reluctant to delay their education for an entire semester, leading most of them to transfer to other schools. As a result, Foxfire Academy recognizes its only option is to close for the year and reopen the following August.

The Insurance Services Office (ISO) identified the specific loss risks faced by educational institutions and created CP 15 25, Business Income Changes – Educational Institutions. This endorsement introduces four modifications to the business income coverage form.

Two of the changes are automatic and take effect once the endorsement is added. The other two are conditional and only apply when relevant entries are made on the endorsement schedule.

SCHEDULE

The schedule specifies the insured premises number and details each school term within a one-year period. For instance, some schools have terms running from August to May, while others consider each semester or quarter as a separate term. Each school has its own definition of "term."

The insured educational institution determines whether limited coverage applies and establishes the length (in months) of any extension to the recovery period for each scheduled premises.

DEFINITION OF THE PERIOD OF RESTORATION

The definition for the period of restoration in the business income coverage form is replaced by the following:

· Coverage will only start after a 72-hour waiting period following a covered loss. Extra expense coverage is exempt from this waiting period.

NOTE: Initiating extra expense coverage right away is logical, as these expenses usually show the insured's effort to rapidly restore normal operations.

· The end of the restoration period marks an important change. Coverage remains in effect until the day before the next school term starts, as detailed on the endorsement schedule. However, this only applies if the school has been repaired, rebuilt, replaced, or has moved permanently to a new location.

The restoration period does not account for extra time required due to the enforcement of or compliance with laws or ordinances for either of the following:

o Controls the use, repair, construction, or demolition of any property.

o Requires any insured or others to respond to or assess pollutants and their effects in any manner.

o The policy expiration date does not affect the restoration period.

NOTE: The rest of the definition remains unchanged. This means coverage does not end simply because the repairs are finished. It ends when the students return for the start of the new term.

Example: Continuing the example above, Foxfire Academy’s term runs from August through May, and the business income coverage applies for the same period. If there is a covered loss, the period of restoration continues until the following August, even if repairs are completed in November. The business income loss is paid until the start of the next school term, provided the limits purchased by Foxfire are adequate.

ADDITIONAL COVERAGE–EXTENDED BUSINESS INCOME

The additional coverage for extended business income in CP 00 30 and CP 00 32 is designed to help a business recover lost income during downtime. Since schools do not gradually increase student enrollment throughout the year, this extension requires a different approach. If repairs or rebuilding of the damaged property are not completed more than 60 days before the school term begins, business income loss payments will continue through that entire term.

This provision is essential because most parents want to secure their preferred school early. If a school is not yet ready to open but guarantees it will be, parents might hesitate to enroll their child. However, if the school opens on time, parents are less likely to alter their plans or withdraw deposits.

NOTE: Extended Business Income Coverage does not apply if the Extension of Recovery Period Option is in effect, as outlined in Section C.

Example: Millicent Day School sustained a covered loss in May and is on track to reopen in August. Everything is on schedule for all repairs to be completed by July 31. However, enrollment does not proceed as desired because some parents do not want to enroll their children in a school that only “promises” to be ready. As a result, enrollment is down by almost 25% when the school opens on time. This extended business income coverage pays the difference in business income due to the enrollment shortfall until the end of the school term.

EXTENSION OF RECOVERY PERIOD

This optional coverage allows the insured greater flexibility to tailor the policy to their needs. The insured must indicate on the Endorsement Schedule the number of months needed after the restoration period for the school to resume full enrollment.

This coverage fully replaces the Extended Business Income coverage. Unlike the Extended Business Income coverage, it does not adhere to the less than 60 day rule and does not end at the conclusion of the school term. The insured will select the duration, but payment is only made if the income loss persists throughout that period.

NOTE: This coverage does not include Business Income loss caused by adverse business conditions affecting the insured premises area.

Example: Accolades College is a four-year institution. A tornado in April destroyed most of the campus, but students managed to complete most of their coursework online and met at alternative locations. However, it takes a full year to repair and rebuild the campus. As a result, most students transfer to other colleges to complete their degrees.

When Accolades reopens, the freshman class is roughly the same size as in previous years, but the upper classes are much smaller. This causes a significant loss of business income, and the trend persists for another two years.

Accolades’ time element coverage includes a 24-month extension of the recovery period. As a result, Accolades continues to receive compensation for the revenue loss from upper-class students for 24 months or until the income loss ends, whichever comes first.

LIMITED COVERAGE

If the insured elects for Limited Coverage:

· The definition of operations is amended to reduce coverage and to consider only tuition, room and board, laboratory, and similar fees as operations.

· Activities such as research grants, athletic events, bookstores, and other non-tuition-related activities are excluded from the operations definition.

If business income coverage includes rental value or if rental value applies, then operations also include the tenancy of the school premises.

Example: Perception College offers a variety of services to its students, including dry cleaning, book sales, a movie theater, a bowling alley, and horseback riding. However, none of these activities are provided unless students are present. Perception does not want coverage for these services because it does not see them as profit centers. Instead, it opts for limited coverage by reducing the required insurance limit.