Liability-Insurance Crisis Seen Ebbing, Schools Act To Cope
The opening for business last January of School, College, and University Underwriters Ltd.--SCUUL for short--was one of several recent signals to educators that the liability-insurance crisis may be reaching manageable, if far from ideal, proportions.
Formed by the National Association of Independent Schools, SCUUL is a $40-million corporation that will make comprehensive and affordable insurance coverage available to any member school requesting it.
It is also the newest option for schools in a growing list of alternatives to the commercial insurance market.
Two years ago, when the insurance crunch was most severe, even the availability of liability coverage was in question for some educational institutions. Today, school officials say, such mechanisms as the self-insurance pool--and, with the N.A.I.S. venture, the in-house corporation--have eased that concern.
"It's possible,'' said Ronald D. Rakich, a California-based risk-management consultant, "that the relationship between public entities and the insurance industry will never be the same again.''
But he and other analysts noted also that, even within the commercial sector, finding coverage has become less difficult for most schools in recent months.
"It looks like the market has settled down a bit,'' Mr. Rakich said. "Schools can find coverage where they couldn't even get a quote a year ago.''
What they often cannot find, said Gwendolyn Gregory, deputy general counsel of the National School Boards Association, are reasonable premiums and coverage for areas considered "high risk.''
Noting these continuing problems--and the cyclical nature of the industry itself--Ms. Gregory concluded that the current crisis for schools "has not gone away.''
In fact, the issue continues to be a priority concern in many statehouses, with insurance initiatives expected to be introduced this year in some three dozen legislatures.
But educators said that self-insurance options, together with an increased attention to "risk management,'' had helped schools weather the worst of the crisis.
The corporation formed by the N.A.I.S. will offer, said Arthur G. Broadhurst, director of business services, "the coverage schools need, rather than what insurance companies are willing to provide.''
Started with a $40-million investment by 45 schools and colleges, SCUUL is a company owned by educational institutions, he said, rather than the type of self-insurance pool that many districts have formed recently to provide coverage.
One of the largest such pools was formed last fall by the New York State School Boards Association. (See Education Week, Oct. 29, 1986.) And a law signed by President Reagan last October, which would allow the formation of interstate self-insurance pools, has interested several other large school groups in the option.
The American Association for Counseling and Development, for example, is conducting a feasibility study to determine whether to create a self-insurance pool for its 24,000 members.
"We're looking for a little more assurance of stability,'' said William W. Hunter, the group's assistant executive director. The association's policy with the Interstate Fire and Casualty Company was renewed last November--for one year. "We don't want to come up to 30 days before renewal and find we don't have a program to offer for next year,'' Mr. Hunter said.
Like a self-insurance pool, the N.A.I.S. company will funnel any profits it makes back into its operations, which may result in reduced premiums for some customers, Mr. Broadhurst said. "I can't tell you every school is going to find a bargain,'' he said, "but some will.''
But, unlike a pool, the corporation will provide coverage for any school that wants to buy a policy, Mr. Broadhurst said.
According to Mr. Rakich of California, even with the increased availability, insurers have generally excluded coverage for risks they consider uninsurable, such as asbestos and pollution cleanup.
Because commercial insurers also often refuse to underwrite policies that include such risks as athletics and other injuries, child-abusecharges, and what are known as "errors and omissions'' suits, most schools no longer ask for them, according to Marc H. Rosenberg, vice president for federal affairs of the Insurance Information Institute, an industry group.
"School districts had unrealistic expectations as to what was insurable a year or two ago,'' he said. "Through education, today they have a much more realistic sense of what is attainable in the marketplace.''
Schools are becoming more reliant, he said, on risk management to reduce the possibility of loss. He compared the trend to such institutions' response to the oil crisis a decade ago.
"In the 1970's, schools began to insulate buildings when the price of heating oil went up,'' Mr. Rosenberg said. "It's the same thing here. Risk management should have been done to begin with.''
Even among the self-insured, risk management has become a staple in the fight against high premiums. The Texas state school services foundation, an insurance pool established by the state school-boards association in 1982, recommends that each participating district adopt a formal risk-management policy, according to Jerry Edwards, its executive director.
The foundation will provide schools with videotapes on improving safety measures and even law courses for educators on ways to avoid the errors and omissions for which they could be sued, he added.
"If you can educate, you can control losses,'' Mr. Edwards said.
State Actions Continue
In the state legislatures, interest in the topic is still strong,
said Brenda Trolin, a staff assistant of the National Conference of
State Legislatures, after a year, last year, in which insurance was
perhaps the dominant issue.
"After 41 states acted [on insurance-related legislation] last year, we thought there might be less activity,'' she said.
In fact, she said, "there will probably be as much if not more'' activity this year.
In a survey conducted by the conference last December, legislators in 37 states indicated that they planned to consider insurance-related legislation in 1987.
One state--Georgia--has already acted. The legislature has sent to the Governor's desk a package of tort-reform legislation that would, among other changes, limit jury awards in liability cases and prohibit the awarding of punitive damages.
Legislatures in Texas and Oregon are also expected to pass insurance legislation before next month.
Although it is too soon to predict what form the legislation in most states will take, Ms. Trolin said, many legislators are considering tightening regulation of the insurance industry. In addition, she said, lawmakers are weighing the possibility of granting immunity to government officials--including school officials--in liability cases.