Risk Management |
Interview by Cecily Garber
Ron Wanglin is chairman of Bolton & Company, where he created a dedicated practice group specifically designated to support independent schools. He is the 2020 recipient of the Sarah Daignault Outstanding Support of Independent Schools Award.
Net Assets: Earlier this year, before the COVID-19 pandemic came to the U.S., you were warning independent schools of a “sea change” in insurance. Is that sea change still with us under the present circumstances?
Ron Wanglin: Yes. I was talking about how the insurance marketplace has recognized two developments regarding abuse and molestation relative to K–12 schools. First, states are rolling back their survivor statutes that allow plaintiffs to come forward from 30, 40, 50 years ago depending on the state. The #MeToo movement has also created an environment in which people are more willing to come forward when they believe conduct is not appropriate. It is the perfect storm, where you have past exposures coming into play and a forward-looking environment where there’s greater readiness to address perceived misconduct — particularly in unsupervised volunteer activity.
Consequently, we’re seeing an increase in underwriting requirements by insurance companies. They’re asking schools for much greater detail about how they’re managing their environment, training and reporting.
See “Holding the Line: Boundary Training Beyond the Checkbox” (May/June 2020) and “Four Guideposts for Maintaining Healthy Relationships with Students” (web-only, May 2020) for more on misconduct prevention.
Parallel to that, we’re seeing a withdrawal of capacity. Other than United Educators, we’ve seen most carriers that used to offer an umbrella policy of $15 million now offer $10 million, or if it was $10 million, now it’s $5 million. They’re worried about the frequency and severity of claims going forward. This means we as brokers have to go to a secondary market to get additional coverage for schools. And those markets too are withdrawing or taking significant underwriting postures. What used to cost around $1,500 for $1 million in coverage may now cost $3,500 per million or more.
Net Assets: Independent schools have been working to mitigate misconduct for years now, but it sounds like the issue will be with us for years to come.
Wanglin: Yes. And in the same way the marketplace is underwriting abuse and molestation protocols, it’s also increasing their underwriting for traumatic brain injuries (TBI). There’s a trickle-down effect. TBI claims started in the NFL and then went through college sports, and now they’re a concern for schools with high participation in sports, mostly football but also soccer and basketball to a lesser extent. Underwriters are looking to see if there is appropriate testing and awareness from the school that a child may have been impacted.
See “A Time To Play and a Time to Heal” (web-only, December 2018) for more on concussion protocols.
Concurrently, on the property side, we’ve had three years of severe weather. Wildfires in California; typhoons in the Pacific region; and hurricanes, hail and tornadoes throughout the Midwest and Eastern Seaboard. Depending on where you are, acquiring property insurance can also be challenging.
Net Assets: And that was all before the pandemic. How might COVID-19 impact the insurance marketplace in the coming year?
Wanglin: Of the five primary liability exposures — general, abuse and molestation, trustee, employment law, and educators’ legal liability — the last two will likely see the greatest impact. If schools have to lay off faculty and staff, that could result in an increase in employment law claims. And concurrently, if faculty or staff are impacted because of COVID related layoffs or illness, that could result in unanticipated workers’ comp claims.
After the 2008–9 financial crisis we saw an uptick in educators’ legal liability claims because families were hard-pressed economically, and they were much more sensitive to the cost of an independent school education. If they felt like their child wasn’t being well-served, they would file a claim against the school alleging that the promise the school made in terms of educational mission wasn’t being met. They wanted a refund of tuition, assistance in placement at another institution and/or ongoing professional counseling for their child.
COVID-19 is obviously worse than the financial crisis because such a greater proportion of the population is being impacted. It’s not just people in hospitality and travel, but attorneys too, for example, are seeing a drop in activity because people don’t have the money to litigate. Depending upon the length of the impact to families, especially those with multiple children in independent schools, it’s foreseeable there could be a disruption of the relationship between the parent and school.
If schools have to continue distance learning, families may say, “Your costs are lower.” They’re not really lower because schools still have to maintain the physical plant and they still have payroll, their biggest expense. But schools may see an uptick in these kinds of complaints.
Net Assets: Some independent schools that have accepted federal funds will now need to abide by additional regulations, such as Title IX and Title VI, for at least a time period. Will that impact schools’ risk management procedures and liability?
Wanglin: Yes. For Title VI, which is nondiscrimination, most schools abide by that and have no problem with it. But for Title IX it will require schools bring in a compliance officer, where likely there has been none it the past. Exactly how the legal requirements work is a question for a lawyer, but in terms of insurance, schools will need to consider if Title IX violations will be covered under the policy.
Net Assets: In the early stages of the COVID-19 pandemic, you explained that schools didn’t buy pandemic insurance because it was too expensive. Has that changed?
Wanglin: In 2004, during the H5N1 avian bird flu pandemic, we did task forces on pandemic management for schools, and there was no coverage and people cried out for it. Then after the pandemic passed, we saw that business interruption coverage was so expensive that nobody wanted it. The coverage that was available was rarely purchased, and if so, usually by very large organizations. Wimbledon, for example, has carried this coverage for 17 years at $2,000,000 per year, and with the this year’s cancellation of the tournament, has filed a claim in excess of $141 million dollars. The larger events in the world may better afford it because their operating budgets are so much greater. But for schools, the cost is still prohibitive.
Net Assets: So what can schools do to prepare better next time? Does business continuity coverage come into play?
Wanglin: Business interruption is comprised of two pieces, business interruption and “extra expense.” Extra expense is the easier part. Let’s say there’s a fire and you can still operate the school, but you need to put trailers in a field. Insurance will pay the extra expense of the trailers, IT and all that.
Alternatively, if a school is shut down in the fall, it would need business interruption to cover the loss of tuition, and the event which shuts the school down would have to be covered. Schools will need to buy the appropriate insurance to ensure coverage of different events. For example, many of our schools in California are subject to earthquakes. But if the school hasn’t bought earthquake coverage, then it can’t use the business interruption coverage because the earthquake wasn’t a covered event.
So insurance always follows coverage, and that speaks to what is going on with the pandemic. Most insurance companies have pandemic exclusions. But that doesn’t mean a school can’t be better prepared for covered events, if its leaders fully understand how business interruption coverage works.#RiskManagement#Pandemic
Auditing Your Insurance Program: What's Not Covered and What to Do (2020 NBOA Annual Meeting Presentation)
The Fires Next Time: Business Continuity During Climate Change (May/Jun 2019)
Holding the Line: Boundary Training Beyond the Checkbox (May/Jun 2020)
Shifts, Not Quakes, in the Risk Landscape (Jul/Aug 2019)
Sign in to leave a comment
Get Net Assets NOW
NBOA's free twice-monthly newsletter
1400 I Street, NW, Suite 675Washington, DC 20005www.nboa.org