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Sexual misconduct claims hike insurance costs for school districts

California schools

ORLANDO, Fla. — California K-12 schools and districts are seeing significant increases in liability insurance rates and shrinking coverage availability due to the escalating values associated with sexual abuse and molestation settlements and awards, experts say.

A more proactive risk prevention and mitigation strategy is needed to reverse this alarming trend, experts said Tuesday at the Public Risk Management Association’s annual conference in Orlando.

Martin Brady, Sacramento, California-based executive director, of Schools Insurance Authority, a Joint Powers Authority that provides property/liability insurance to 70 school districts in Southern California, said that the risk insurance pools are experiencing an “unhappy triad.”

“Self-insured retention levels are going up, deductibles are going up, and capacity is going down. There are cost increases and you are paying more and getting less,” Mr. Brady said during the session The Costs of Sexual Assault and Molestation.

“Some of these escalating costs and jury verdicts that are coming out are horrific … Financially we’re on a trajectory that is not unsustainable,” he said.

“Now that we’re in a hard market for property and general liability [insurance] it really puts the squeeze on us financially … It’s imperative that we be successful and try to counteract some of these trends,” Mr. Brady said.

‘This is a time for us not to function as individual joint underwriting pools, we need to link arms because we need some solutions,” he said.

A 2018 California auto liability and general liability study including a dozen K-12 school pools generated a data base including 14,000 occurrences with $780 million of total incurred value, experts said during the session.

This data represented over 60% of the state’s average daily attendance over the last 10 years.

“We collected 10 years of data and one of the initial findings was shocking,” said Craig Bowlus, Washington-based managing director of risk pooling, at Aon PLC.

Some 0.8% of claims in excess of $1 million, or 113 out of the 14,000 occurrences, generated 50%, or $389 million of total incurred values, said Mr. Bowlus.

“We came to the conclusion that the cost driver was sexual abuse and molestation,” he said.

In the study, some 37 sexual abuse and molestation occurrences included some 96 individual claims, averaging $1.5 million per claim, said Mr. Bowlus.

Most of the large occurrences were associated with teachers, while aides, student-on-student activity and coaching-related occurrences accounted for the remainder, he said.

A couple of plaintiff law firms also seemed to be “more active” on the occurrences and generated substantial awards, he said.

“The sexual abuse and molestation exposure in 10 years in California in this sample appears to be in the $70 million to $200 million range, or $350,000 per claim. That’s significant,” Mr. Bowlus said.

Given the rising severity, a school facing a sexual abuse and molestation claim in California needs to be thinking in terms of six figures, he said.

All schools and districts should have procedures in place where they do not allow situations where a teacher can be one-on-one with a student, experts said.

“It’s not just teachers but contractors, the after-school programs. It’s very important to look through the contractual language with third parties … We want to ensure there’s never an opportunity for an adult to be left alone with a child,” said Mr. Brady.

“We’re creating healthy boundaries, for the protection of our staff as well as our students,” he said.

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