Arizona School Risk Retention Trust Will Not Provide Coverage For Coronavirus Claims

Published: Tuesday, August 4, 2020 - 12:10pm
Updated: Wednesday, August 5, 2020 - 12:35pm
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LAUREN GILGER: As schools face the challenge of trying to find a way to reopen safely in a few weeks, they got some bad news from their insurer. The Arizona School Risk Retention Trust, which provides coverage for nearly 250 school districts in the state, notified members that it will not provide coverage for claims related to coronavirus. The trust operates as a pool of school districts and is backed by reinsurance companies, and it's now considering some other options. Their board is scheduled to meet [Aug. 4] to discuss some potential solutions to fill the gap in insurance in the meantime. And I spoke with Scott Little more about it. He's the board president for the trust, and I asked him what the reasoning is behind not offering insurance against these kinds of claims.

SCOTT LITTLE: Well, you know, you can't insure something that you can't predict. If you can't predict and you don't have enough of a frequency to be able to make any sort of projection, you can't insure it. Which is why on a national basis, things like earthquake insurance is completely a separate coverage that you purchase special as a specialty. No homeowner's policy in California provides earthquake coverage; you have to go out and procure a separate one. So in order to create insurance, you have to have a stability, frequency and, you know, some ability to understand the risks that are involved.

GILGER: So then I want to talk about, you know, what this might mean for schools, right, heading into this next school year. I mean, are you concerned that schools will face claims, lawsuits from families of kids who say that they came down with COVID-19 when they were sent back to school?

LITTLE: I think it's absolutely predictable that we will see claims from any number of parties — not just parents and students, but potentially employees. If you look at the Wall Street Journal today, "Families File First Wave of Covid-19 Lawsuits Against Companies Over [Worker] Deaths." It's already out there.

GILGER: So I want to talk then about these waivers as well, though, the waivers that schools have sent or can send to parents as the school year gets under way. Are you hoping those will help protect schools in cases like this?

LITTLE: Yes, we hope it protects the schools, but a little bit of history. So the trust created its response out to its member districts based upon misinformation about their, about COVID-related claims being covered. So there were districts that were making decisions to open school buildings and making statements such as, "Well, we have insurance for that." And so the district, the trust started communicating with the school districts in order to give them a heads up about what coverage is actually covered and then to give them some best practices. We knew that the waivers would be controversial, which is why it's all suggested and at this point it's not currently required. It's more of a, this is an advisory for you. It's a recommended step, but it's not currently a mandated step. If you go back, I'm gonna say June, here in Arizona, the issue of this liability was already being discussed as a need for a special session with the Arizona legislature. And the federal government was already talking about it. You can go look at correspondence right now at the federal level that this issue of liability has been on people's radar for a long time. Unfortunately, while it's been on people's radar, there still hasn't been a sufficient response of either the state or the federal level to address the issue.

GILGER: So is that the solution you would look toward? Do you think this needs to come from a policy level?

LITTLE: In my opinion, the best solution is at a federal level. If they set a uniform standard by which negligence has to be proven, then it certainly will avoid the issue of having to defend frivolous lawsuits. Unfortunately, we love to litigate as a nation. You know, our first response to everything is to sue. And unfortunately, the very nature of the system is, is that people sue for frivolous items, but unfortunately, organizations settle because it's cheaper to settle than it is to fight. So you can be right, but it still costs you money to defend yourself from frivolous lawsuits. And so the goal was to eliminate the frivolous lawsuits. The other issue that exists underlying this conversation is, is that it's gonna be really difficult for people to prove the direct causation on COVID. I mean, there are going to be situations in which you can establish a link. But in a lot of situations, it's not going to be possible to show that clearly. And so it would be an appropriate response at the federal level to set forth clear lines of what standards have to be met in order to pursue that litigation. You know, we hope for a federal solution. I would be happy with a state solution.

GILGER: So the board, though, is meeting to vote on kind of how to fill this insurance gap. What, what do those solutions look like? In terms of filling this gap and in the short term, but before any kind of policy solution comes down?

LITTLE: We are looking at some level of coverage. It will be very limited, and it will be an optional decisions on the part of each school district to determine whether to purchase this additional coverage. Because in this situation, we are not able to go out into the insurance market and purchase reinsurance. We will actually be completely self-funding this coverage. So we have to look at our reserves that we have as an insurance company and look at how much of these reserves we can put online for this coverage at risk in order to assist the districts.

GILGER: All right. That is Scott Little, the board president of the Arizona School Risk Retention Trust. Scott, thank you so much for joining us.

LITTLE: Thank you very much. 

On Tuesday, the Arizona School Risk Retention Trust (The Trust) approved a plan to facilitate coverage for COVID-related claims for an additional premium. The Trust issued the following statement:

This exclusion was a response to a decision by our reinsurers—insurers who protect the Trust against catastrophic losses—to exclude COVID-19 liability coverage from ­their policies effective July 1, 2020.

We also communicated with you regarding the Trust’s exploration of a coverage solution of its own, without reinsurer support. We’re pleased to announce that this solution was presented to and approved by the Trust board of directors on August 4, 2020.

Members can now add the coverage for an additional contribution/premium that will vary depending on district size.

Additional details on the new coverage are as follows:

One of the coverage preconditions is that districts implement a reopening plan that incorporates guidelines issued by the Arizona Department of Education (ADE) for K-12 districts and Centers for Disease Control and Prevention (CEC) for community college districts, to promote on-campus health and safety.

Another coverage precondition is that districts ask parents and guardians to sign a liability waiver or an “acknowledgment of risks” form. Parents, however, cannot be required to sign.

The purpose of the acknowledgment and waiver forms is to: 

  1. Inform parents of the risks inherent in in-person education during the COVID-19 outbreak;
  2. Educate parents on the steps they will be expected to take to protect their child(ren) and others from COVID-19 transmission while attending school;
  3. Strongly encourage behavior that will reduce the risk of COVID-19 transmission;
  4. Limit unfunded district liabilities for COVID-19 exposures.

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