Insurance Boot Camp Understanding Coverages for Your School Division, Staff and Students VASBO Fall Conference Continuing Education October 15, 2015 1:00 p.m. Presented by David Brooks Lee Brannon and Stephanie Heintzleman
Education is a risky business Significant Liability Pressure on Performance Unfunded Mandates EDUCATION Virginia Budget Constraints Emerging Risk Exposures Rising Litigation
Risk Exposures to Schools After-school Activities Athletics/Physical Ed Bullying Campus security Classroom Safety Construction Projects Counseling Custodial Operations Cyber Security Daycare operations Drama/Theatre Educators Legal Liability Employment Practices Exceptional Students Extracurricular Activities Extreme Weather Facility Maintenance/Repair Facility Users High Risk Activities Human Resources Information Technology Litigation Nursing Nutrition Pupil Transportation ROTC School Facility Use School Finance Science Labs Sexual Harassment Special Education Special Events Student Accident Insurance Student Health Vocational Education Workplace Violence
Today s Objectives Describe Role of Insurance Coverage Types Certificates of Insurance What Affects the Cost of Coverage? Real Life Scenarios
Four Ways to Manage Risk 1. Avoid eliminate the situation or activity that presents the risk 2. Reduce minimize chance of loss through safety procedures, training, and equipment use 3. Transfer purchase insurance coverage 4. Retain assume the risk by paying for losses
What Really Is Insurance? It is a risk management tool that transfers the cost of potential loss to another entity in exchange for money (premium contribution). It is a contract that specifies the coverage limits and deductibles It indemnifies or makes whole the insured party by Compensating for a loss (less deductible) Providing security against anticipated loss It does NOT allow for the insured to be in a BETTER position after a loss
Pools versus Insurance Insurance companies are for profit companies with a goal to make money. insurance company keeps the profits pay a premium and never see that money again, regardless of your claims experience coverage is on a standard form (take it or leave it) Group Self-Insurance Risk Pool is fully owned by members group of like entities with similar exposures, anticipated risks not for profit members build equity, receive dividends (depending on losses) coverage specifically drafted to meet members needs
Transfer of Risk 1. What is transfer of risk? 2. Why do it? 3. When to transfer risk? 4. Ways to transfer risk
Why and When to Transfer Risk? To protect yourself from those that enter your property to perform work for you (not all contractors have insurance) use your facility for their function Consider each situation BUT treat equally by asking: What will they be doing? What is the potential for loss? Who can best mitigate exposure? Can you afford the loss if no insurance? TULIP
Ways to Transfer Risk Require proof of insurance policy ENDORSED to show school division additional insured Certificate of Insurance Written Contract Indemnify and hold harmless provision
Certificates of Insurance Evidence that the other party has insurance in place. Look for Wording that says school division is Additional Insured Evidence the change is Endorsed to the policy
Assumption of Risk Forms Assumption of Risk forms are used to demonstrate that participant voluntarily and knowingly assume the risks associated with a specific activity associated with the Assumption of Risk form Participant signature indicates their understanding of the risks involved with the event or activity Effort to safeguard the schools from liability
Hold Harmless/Indemnity Agreements Hold harmless and indemnity agreements are used in conjunction with additional insured status gives schools right to collect from contractor for claims not covered by insurance requires contractor to pay damages to third party contractor must have resources and/or insurance to cover risk
Types of Coverage First Party Third Party No Fault
First Party Coverage Loss sustained directly by the insured: Property buildings, contents, inland marine, EDP, business income/extra expense Boiler & Machinery equipment breakdown, boiler/pressure vessel inspections Crime faithful performance, employee dishonesty Auto physical damage Environmental Liability clean-up
Third Party Coverage Loss sustained by another party: General Liability property damage, bodily injury Environmental Liability clean-up School Leaders Liability wrongful acts Workers Comp, Employers Liability (no fault) Auto liability
No Fault Coverage Pays claim regardless of fault: General Liability Auto Liability - medical payments Workers Comp, Employers Liability Student Accident - medical expenses, secondary to other insurance
What Insurance Should be Required? (for Independent Contractors, Facility Users) Workers Compensation Employers Liability Professional Liability Auto Liability General Liability Construction Projects Builders Risk
Property Coverage Definition Coverage for property damaged or destroyed by a covered peril, unless specifically excluded Covered perils may include: fire, lightning, explosion, vandalism, hail, sinkholes, civil commotion, smoke, damage from vehicle, falling objects, accidental discharge of fire extinguishing equipment, weight of ice/ snow flood, wind, earthquake covered with special language or endorsement with possible exclusions and deductibles
Construction Projects Consider transferring these risks: damage to the building under construction construction worker injuries (workers comp) theft of building materials and equipment injuries to others (third party) construction cost overruns lost income due to delay in construction failure to comply with government regulation
Builders Risk Covers property under construction, renovation or repair. usually covers risks, such as theft, vandalism, accidental losses, damage, or destruction of property for which you have an insurable interest does not cover the contractor s equipment/tools coverage ends when project is complete
Property Insurance Cost Factors that affect property insurance cost Value of buildings/contents Location (zip code) Construction type Degree of protection (from fire, wind) Deductible
Property Insurance Provisions Valuation Actual Cash Value: property value after considering depreciation Replacement Cost Value: cost to replace with similar materials, same building use Business Interruption Coverage Replaces lost income and/or business expenses required to continue operations when building not available because of covered loss
General Liability Definition Third parties (visitors, vendors) who suffer bodily injury or property damage as a result of negligence on the part of the school division. Examples slip and fall on a wet floor trip on a torn carpet pot hole in a parking lot explosion of an oxygen tank not properly stored/maintained 30
General Liability Coverage Covers bodily injury and property damage to third parties. Transfer this risk to contractors when: contractor works where people can be injured or property may be damaged contractor provides a product that could cause bodily injury or property damage to others completed project (such as a building) may fail, causing bodily injury or property damage to others
Independent Contractors Consider these exposures for those providing services for school division: Automobile liability General liability Professional liability Workers compensation Employers liability
Umbrella Usually used to meet contractual requirement of very large coverage limits: 1. provides excess limits over primary or underlying coverage 2. picks up when underlying aggregate* limit is exhausted 3. may cover claims not covered by primary policy *Aggregate is maximum paid on all losses that year
Claims-Made v Occurrence Coverage Occurrence coverage responds to claims even after the policy has been canceled if incident occurred when coverage was in force. carrier at the time of the incident provides coverage general liability policies are usually occurrence based Claims-made coverage responds when a claim is made, regardless of when the incident took place must be after the retroactive date (VACORP is July 2001) professional (school leaders) and pollution liability policies are usually claims-made covers claims from before coverage period/retro date ONLY if the extended reporting period or tail coverage in place
Automobile Insurance Protects from financial loss for damage or liability resulting from car accidents or incidents. Four types of coverage: 1. Liability 2. Medical Payments 3. Un/Underinsured Motorists 4. Collision/Comprehensive
Virginia Statutory Coverage Limits require vehicle owners purchase at least a minimum amount of liability insurance often described 25/50/20: $25,000 per person injured in an accident $50,000 for all injuries for that accident $20,000 for property damaged in the accident
Auto Liability Coverage Bodily injury protects against liability associated with injuries caused by the covered person Property damage protects against losses that result when the covered person damages another person s property with their car
Medical Payments Coverage (Automobile Liability) covers the cost of medical care for passengers injured in an accident where you are at fault applies only to those in covered vehicle
Uninsured/Underinsured Motorist Coverage Uninsured motorist coverage covers cost of bodily injury when another driver, who is not insured, is liable Underinsured motorist coverage covers cost of bodily injury when another driver, who has insufficient coverage, is liable
Collision/Comprehensive Coverage Collision coverage covers cost of damage to your car resulting from an accident in which the covered driver is liable Comprehensive coverage covers repairs for damage resulting from animals, floods, theft, fire, hail, and various other events Deductible: amount paid by covered person before carrier pays
Workers Compensation & Employers Liability Coverage for work-related injury, death or disease Related medical costs Replacement Income 7 day waiting period, which is paid if out of work over 21 days Rehabilitation return to work in another capacity Death Benefits burial allowance weekly income for spouse and/or children
Elements used to Determine Cost of Workers Compensation Coverage Total Payrolls audited to determine actual amount paid Classification Codes 7380 Drivers 8868 Professional Employees & Clerical (central office staff, principals, teachers, social workers, coaches, guidance counselors ) 9101 All Other Employees (custodians, cafeteria, maintenance) Rates Experience Modification Factor (multiplier)
Experience Modification Factor Mathematical calculation to create MULTIPLIER used to determine cost of workers comp coverage reviews frequency of claims reviews severity of claims in dollar value compares experience to expected claims within class code uses three years of data
Student Accident Coverage Covers medical costs for injured students during school activities Cost based on total enrollment (ADM) Athletics may be included, usually additional cost Excess over all collectable insurance Requires timely reporting of claims to carrier within 90 days of incident or no coverage Related medical bills are paid based on benefits schedule bills must be incurred and reported within one year
Role of Coverage Provider Claims Handling determine if covered pay claims Underwriter evaluate exposure, calculate risks, assist with appropriate coverages determine annual premium contributions rates based on claims and exposures Risk Management prepare loss reports provide safety training
Group Exercise In these three scenarios, what type of coverage(s) might come into play? What important considerations need to be made? 1. School Bus accident 2. Earthquake 3. Chemistry Lab explosion
Questions For additional information, please email info@vacoins.org or call 888-822-6772 Thank you!