Posted on 26 Feb 2013 by Annie George
First there was Columbine. Then Virginia Tech. Now Sandy Hook. These are the events that make us weep as a society for the senseless violence and tragedies that have taken place at our educational institutions. These events compel us to try and figure out what to do, and how to change things. It is also part of the security issues with which schools across our country have to deal. Public and private schools and higher learning institutions have implemented and continue to implement measures to mitigate security risks while at the same time the insurance industry is addressing the varied exposures schools face with products and programs specifically designed to meet their needs.
Victor O. Schinnerer & Company has been at the forefront of addressing these security exposures with its Academic Security Risk Management Program, an extension of their Kidnap, Ransom & Extortion (KRE) product. Schinnerer, headquartered in Chevy Chase, Maryland, is one of the largest and most experienced underwriting managers of professional liability and specialty insurance programs in the world. We spoke to Sarah Katz, assistant vice president and senior underwriter at Schinnerer, soon after the Sandy Hook tragedy about the Academic Security Risk Management Program. Sarah has been with Schinnerer since 1998, and began working in the KRE division in 2000.
Annie George (AG): In our newsletter nearly a year and half ago we spoke with you about your KRE product and the global exposures it addresses. Now I'd like to turn our discussion to schools and the various security concerns they face and the coverage available to them.
Sarah Katz (SK): "Most clients and brokers when they think of Kidnap, Ransom & Extortion, they think of foreign exposures in high-risk regions. Yet there are policies available that also cover domestic exposures, especially for certain classes of business and entities.
"At Schinnerer, our Academic Security Risk Management Program is designed specifically for schools. Under this program, we have a product crafted for public and private K-12 schools and another for higher learning institutions. Our programs broaden the traditional KRE policy to address a wider scope of security concerns and exposures an academic institution would face, with a large number of them domestic. Coverage is available for different risks, including for the type of incident that occurred at Sandy Hook. In this case, under the assault expense coverage, a death and disability benefit would be provided as well as coverage for additional costs for transportation to bus students off-site in the wake of an event and the leasing of temporary facilities off site if the school facility is off limits after the event. In addition, the resources for temporary increased security measures, the costs of additional staff that may be needed as well as salaries of affected staff, counseling for everyone involved, legal advice for the school, cost for rest and rehabilitation for those directly affected by the incident, and the cost of communications and public relations assistance for the school would all be covered expenses under the policy.
"For private schools the cost of loss of earnings/tuition as result of a covered event is also part of the insurance program. This may involve reimbursing tuition or a decrease in enrollment because of the incident."
Sarah also explained that an important part of their program is that members have access to an experienced crisis response firm. "There is a prevention fund available as part of the policy in which 15% of the premium may be applied for services from our crisis response firm to help control and mitigate risk," said Sarah. "Insureds have access to security training, assistance in developing a crisis preparedness plan, and participation in simulation exercises for administrators and/or members of the school's crisis management team. We also provide crisis management guidelines; for example, what to do if there is a hostage situation, what to do if a threat is received or if someone calls who has kidnapped a child."
AG: In addition to the type of tragic incidents that have made headlines, what other events are covered under the Academic Security Risk Management Program?
SK: "The policy addresses various other security concerns a school has beyond an assault, such as child abduction from the school premises or a school-sponsored event, like a field trip or during studies abroad. Legal liability coverage is provided so that if the school were sued as a result of the child abduction it would be covered in addition to covering the payment of rewards and investigation costs. It also provides the assistance of an experienced crisis response firm with expertise in handling these types of incidents and assisting in tracking/locating an abducted child. Even if a child disappears and is not abducted while under the care, custody and control of the school, coverage for the crisis response firm to locate the person would also be covered.
"The program also provides coverage for a hostage situation in the school. Coverage is also provided for extortion; for example, if someone calls the school claiming they placed a bomb and demands a ransom, the ransom and extortion monies would be covered. Customer identity extortion also falls under this policy. If an individual hacks into the school's database or through another avenue is able to obtain confidential information (medical records, personal financial information) on their students and extorts the family(ies) with the information, coverage is available under the program.
"If a school receives a threat to either damage property, harm an insured person, or reveal confidential information, the crisis response firm will conduct a threat assessment and determine what steps to take, the likelihood of the threat being carried out, and the temporary measures the school should take as recommended by the firm in response to the threat.
AG: Do most schools carry this coverage and is it expensive?
SK: "As incidents become more prevalent, an increasing number of private schools are purchasing the coverage in addition to public school districts and the states. In some states, a large percentage of schools carry the coverage, with an increased number of educational institutions interested in finding out more about what's available.
"The minimum premium is $2,500. For K-12 schools, limits of $1-$5 million per insured event is available. For higher learning institutions, higher limits are available, as they have different exposures with many operating as small towns in and of themselves. We realize how valuable our brokers' time is so we've made the quote process very easy. All we need is basic information about the educational institution: size of school, average daily attendance, ages of children attending the school, any foreign exposure (international travel), the percentage of exchange students, any prior incidents. Even if a broker has never sold KRE coverage to clients, we can walk them through the policy and help them sell their clients on the importance of managing their KRE risks.
"We hope the type of incidents we have seen and are discussing never occur, but unfortunately they do. A school may not have the resources to manage these types of events. Our program not only provides the coverage to mitigate the costs, but also offers the assistance of a crisis response firm to help with the families and individuals impacted and help make sure that the resolution is handled in a way that is sensitive to everyone involved and has the best possible result."
Schinnerer has been offering KRE coverage for 15 years, and launched the Academic Security Risk Management Program four years ago. The program is open access to agents and brokers, and coverage is available on an admitted basis in all states except South Dakota and Washington. For more information about this program, please contact Sarah at 301.961.9898 or email her at SarahJ.Katz@Schinnerer.com