The liability landscape for educational institutions remains a dynamic and continuously evolving segment of the marketplace. Institutions of higher education and K-12 schools face a unique set of risks and challenges that differ from those faced by the commercial segment of the industry.

Many of us by now are familiar with key issues such as the rise in the reported volume and severity of sexual misconduct claims, auto accidents and the general impact that social inflation had on the liability insurance market, particular for educational institutions. In the past six years, we've seen the terms "nuclear verdict" and now "thermonuclear" coined to refer to large jury awards.

The insurance marketplace, particularly for excess liability lines, saw a massive correction take place in 2021, with wide-spread reductions of capacity, less availability of key coverages and substantial rate increases to keep pace with loss activity.

We reported last year that the marketplace for education was beginning to stabilize. In the second half of 2024, we've been able to reflect on a second wave of underwriting adjustments in the marketplace, tempered somewhat by new capital entering the market over the past year. We'll spend some time in this article unpacking some of the driving forces behind this second wave of underwriting change, as well as some of the evolving risks educational institutions face in today's environment.

Claim Trends in Education

In their 2024 Large Loss Report, the nation's largest single writer of education business, United Educators, includes published reports of settlements and awards which shows the growing trend in the frequency and severity of claims over the last nine years.1

To remain profitable and ensure long-term sustainability for their clients, insurance carriers must keep pace with the rising cost and frequency of claims activity. In 2024, we saw the marketplace cautiously deploying smaller amounts of excess liability capacity, and the single-digit rate increases that we enjoyed as a part of the stabilizing market in 2022 and 2023 swung back into the low double digits through the first half of 2024. Those trends appear to be continuing uninterrupted throughout the third quarter.

In the same 2024 Large Loss Report, United Educators reported that sexual misconduct is the driver of roughly 25% of all claims cost over the past year, which has trended upwards since last year's 20% statistic. Of all general liability related claims between 2019-2023, United Educators reports that sexual misconduct claims account for over 40% of total loss costs.1

An Unpredictable Future for Sexual Misconduct Coverage

The exposure that sexual misconduct brings to the liability insurance marketplace makes underwriting for it unpredictable, especially as states continue to pass legislation that changes the statute of limitations or remove it entirely.

According to an updated overview provided by Child USA — a non-profit organization that tracks childhood sexual abuse stats — as of May 23, 2024, 33 states had introduced legislation to reform the statute of limitations around child sexual misconduct.2

As legislative change continues, insurers have responded by introducing coverage changes such as the implementation of a 10-year sunset clause. The sunset clause functions to limit the term under which child sexual misconduct claims can be brought against an insurer, similarly to the statute of limitations that's now absent in many states.

Another approach is to transition traditional occurrence-based programs to a trigger based on claims made, allowing insurers to close their books after each policy year with an accurate representation of their loss picture for that given year.

Insurers carefully evaluate the extent of sexual misconduct risks in educational settings, accounting for industry trends, past claims and legal venues. The appetite from insurers to cover sexual misconduct ranges, with some willing to provide full coverage and others open to considering the offer with certain limitations.

Sexual misconduct coverage has become more available so far in 2024 due to new levels of capital deployment into the education segment. In some instances, this new capital has been used to rebuild additional capacity that our educational institutions lost previously, and in other cases it's served as a viable replacement for vacated capacity as incumbent insurers continue to carefully manage the amount of insurance limit they put out on an individual risk.

Violence on Campus

Active assailants and violence on campus are risks we're far too familiar with given the frequent headline news stories. These events remain at the forefront for institutions of higher education and K-12 independent schools across the nation.

The K-12 School Shootings database presents startling public data that shows the significant jump in the number of campus shootings starting in 2018 with 119 incidents on campus.3 In just five years, this number has almost tripled — we ended 2023 with 348 school shooting incidents on campus. The data counts include any acts of gun violence on K-12 public, private and charter school campuses, including mass shootings, gang shootings, domestic violence, shootings at sports games and after-school events, suicides and other incidents.

While many states require that schools have well-established active shooter procedures in place, industry experts like United Educators suggest seeking additional help from legal counsel and outside experts in school security. Ensuring that schools have the right response procedures in place that they can flawlessly execute in a crisis can be the difference in saving lives. We saw with the shooting in Uvalde that coordination and swift response amongst local police, federal law enforcement and school security onsite is key. Establishing a clear chain of command is imperative and can help initiate a swift response when there are varying levels of law enforcement agencies all responding to an incident.

Insurers carefully evaluate the potential risks associated with active shooter incidents given the unpredictability and potential severity involving catastrophic loss to multiple potential victims. Carriers continue to look at ways to limit the amount of coverage available for this exposure, and, as a result, schools can have difficulty finding the desired level of insurance. New products that specifically address active shooter incidents and non-deputized campus security are worth exploring further.

The 2024 education insurance market will certainly continue to evolve. Staying abreast of current events and coverage trends, truly understanding the unique risks their educational clients face, and working with experts like RPS will help agents ensure they're getting them 360-degree coverage.

Contributor Information

Source

1"Large Loss Report 2024," United Educators, 2024. PDF file.

2"National Overview of Statutes of Limitation (SOLs) for Child Sex Abuse," Child USA, accessed 10 Sep 2024.

3"Number of People Killed in Active Shooter Attacks at Schools Each Year," K-12 School Shooting Database, accessed 10 Sep 2024.