EDUCATORS’ LEGAL LIABILITY PROGRAM UNDERWRITING CONSIDERATIONS

(July 2024)

Evaluate the Coverage

Underwriting can’t truly begin unless there is a clear understanding of the coverage being provided. The coverage form on the existing policy, if any, must be reviewed to determine how the current form compares to coverage being contemplated.

Because each insurer develops coverage features according to the market it desires, wide variations can be found in their respective programs. There are likely to be considerable differences in the terms and wording found in the following:

  • Insuring Agreements
  • Exclusions
  • Conditions
  • Defense
  • Limits
  • Supplemental Coverages
  • Optional Coverages

Related Article: Educators’ Legal Liability Coverage Analysis

Evaluate the Named Insured

The named insured and its operations are the key. If there is more than one named insured, its reason for being on the policy must be explained along with its relationship to every other named insured on the policy.

The finances and management must be explored because both will determine how well exposures will be controlled. New or inexperienced management may take actions that deviate from the past which will make it difficult to use prior loss history to predict future losses. Lack of financial resources may cause a previously acceptable operation to have problems because of cost cutting measures that could hamper effective loss prevention measures or documentation procedures.

The combining of two different entities into a single entity may signal a weakness in both entities or could be a positive activity of two entities recognizing a need to join together to gain synergy. However, whenever a merger occurs, a significant number of lapses may occur as procedures are combined. A well planned and documented merger procedure should be in place.

Evaluate the Facility

The type and size of facility must be carefully considered. The larger the facility and less homogenous its student population, the higher the chance of a loss. This means that its procedures, documentation, and training are vital. Smaller and more homogenous facilities are less prone to losses but losses can occur when training is lax and procedures and documentation are lacking.

 

Example: Mega University is an urban campus with a student population of 50,000. Small Parochial School is in a rural county and has a K-12 student population of 120. Both need to have detailed procedure manuals, continuous staff training and proper documentation. Mega may need a large staff to accomplish this goal while Small may be able to rely on the principal’s administrative assistant to provide the needed services.

A complete demographic of the facility must be provided. The operations of the school must be described. This should include ages and types of students for whom services are being provided. Extracurricular activities, foreign and domestic travel opportunities offered, and offsite activities must be provided. The composition of the school board must be considered along with its stability.

Evaluate the Loss Experience

Regardless the size of a given risk, prior loss or claim experience is very important. The type, frequency and severity of claims experienced by the insured warrant careful evaluation. The facility's age and history, as well as the background, education and experience of its board, directors, officers, faculty, and staff who are to be covered are considerations. Data provided in the initial application for coverage will provide the agent and insurer with a feel for the quality, integrity, knowledge, and experience of the insured under consideration. This information will assist in determining whether the risk is desired by the insurer and what features should be included in the program it is willing to offer such as:

·         Coverage options

·         Exclusions

·         Amount of “per claim” and aggregate limits

·         Deductible or self-insured retention

·         Whether excess liability limits are necessary or available

Evaluate the Loss Prevention Effort

Having risk management or loss control measures in place is essential for educational risks in their effort to minimize their exposure to legal liability claims. Steps taken in this direction have the following benefits:

·         Improves the likelihood that an institution will meet an insurer’s eligibility requirements

·         May allow a choice of insurers who offer Educators’ Legal Liability insurance programs

·         Reduces the premium paid to an insurer

·         Allows the institution to spend less time handling losses and more time on core operation of educating students

Educational facilities must establish guidelines and procedures to minimize their exposure to errors, omissions, and professional or other legal liability claims. Establishing procedures and monitoring their application is important. Documentation or recordkeeping, including notes and correspondence, is critically important.

Many claims arise out of an institution’s personnel decisions. Thorough background checks (including criminal records) should be performed for all employees who will have significant contact with students. If employment-related practices coverage is included on the Educators’ Legal Liability policy, additional loss control methods would include careful documentation of hiring, firing, and tenure decisions.

Educators’ Legal Liability policies almost always exclude corporal punishment. However, this coverage may be desired by an educational institution as part of a comprehensive risk management program. A school requesting such coverage (in a state where corporal punishment is LEGAL) would need to verify that it had a written policy for its use. The policy would have to state who is authorized to administer it, require the presence of witnesses, describe circumstances for its use, communication to staff and parents, and records of its administration.

An institution’s records are now, primarily, digitized. Its security must now include reliable methods of preventing unauthorized access (including hacking). The educational institution should have a written policy that governs the release of such information, and communicate it to students, faculty, and other personnel. It must also have security software, protection updates and monitoring procedures in place.

Example: Jim is a biology professor at Mega University. He is attending a week-long conference on emerging medical trends. He takes a University laptop with him to store and make comments on seminar information he retrieves online. He is upset when he finds he is locked out of uploading the information to his department’s shared note system. He receives an email from a member of Mega’s IT Department stating that all info downloaded from outside sources must be scanned before it’s permitted for uploading. He will have to have his laptop and any storage media checked out on his return.

Directors and officers of an educational facility should routinely review adherence to its risk management guidelines. A willingness to try different strategies, correcting weaknesses and being open to taking advantage of the experiences of others strengthen internal guidelines. Many insurers offer substantial premium credit for effective risk management programs. Some maintain an ongoing risk management relationship with their insureds, including offering loss control seminars for educational facilities.

Agents and Insureds Must Evaluate the Insurer

Educators’ Legal Liability is a non-standard coverage offered by specialty insurers that have substantial knowledge, resources, and experience in underwriting the educational field. Insurers usually specialize in a specific sub-group within the broad category of educational risks, such as art, dancing, or music schools, private or parochial schools, public schools, boarding schools, vocational/trade schools, or colleges and universities.

Each insurer providing coverage to the educational institution market has individual programs designed to meet the exposures faced by its targeted educational facilities. Examples of specialized exposures are:

·         Parochial and other religious-based institutions - clergy counseling coverage

·         Medical schools - medical malpractice coverage (for employed medical personnel)

Each insurer’s underwriting guidelines/approach must be evaluated for compatibility to each insured. This must be done with great care as there is no standard for making program comparisons. Some insurers have separate eligibility requirements for overall coverage, certain individual coverages, and payment basis.

It is important to determine the insurer’s level of expertise in the market. Indicators include how long it has been in the market and what is its market niche.