ASBSD Chief Financial Officer Bill Lynch discusses the fallout of a catastrophic event in a school district.

 

 

By Bill Lynch

 

You never know when catastrophe is coming. It may never happen. But, when it does, it’s unpredictable.

 

However, how you’re prepared for those terrible situations can make a difference.

 

The hard part is making decisions about the future and developing a rebuilding plan with your insurance carrier for a school building along with desks and computers.

 

This begs the question for all schools: are you certain you have adequate insurance coverage to replace your buildings and their contents?

 

A catastrophic event could happen and you should take the time to reevaluate your policy and coverage levels for your school buildings. This review would be to determine if you have sufficient insurance coverage for your district in the event of a fire or other disaster.

 

This would mean determining the right coverage is in place to move forward with a rebuilding plan without burdening the taxpayers with added taxes in the process.

 

I can say with certainty if you have Property / Liability insurance with the Associated School Boards Protective Trust program you are properly covered for the full replacement cost plus other extra business expenses.

 

If you have commercial insurance, I can almost guarantee you do not have sufficient insurance coverage to finance temporary classrooms and may not have sufficient coverage limits to replace the buildings and your financial fall back would be your local taxpayer.

 

I can say this because unless you annually evaluate the value of your buildings with the rate of inflation in the building industry and have building appraisals periodically with your commercial insurance carrier, you may not have sufficient insurance proceeds to rebuild. Without sufficient coverage to rebuild you may have to go out to the tax payers to issue Capital Outlay Certificates or Bonds to cover the full replacement costs.

 

Why do I say that?

 

If you have your school building insured with a commercial policy for a declared value of $7,000,000 and the co-insurance rate is 80% you will get a check for $7 million even if the replace cost is $10,000,000.

 

ASBPT Property and Liability fund is responsible for buildings being properly appraised and trended accordingly. If our appraisal is below value ASBPT will still cover 100 percent of the replacement cost.

 

With commercial insurance who finances the difference?  You’re Tax Payers!

 

The ASBPT policy coverage is designed so you should never have to go to the tax payers with full replacement coverage up to $250,000,000 per occurrence.

 

That would replace a significant number of school buildings.

 

The main reason for this amount is the coverage also includes storm damage, and this level of coverage is on a per storms basis. Storm paths can include the whole state and the ASBPT planned the coverage accordingly to accommodate for large areas receiving damage.

 

Extra business expenses are also a part of the rebuilding process and most commercial policies have a very low limit to cover the cost of such things as temporary classroom.  You don’t purchase many temporary classrooms for $25,000, which is the level of coverage in most commercial policies.

 

Now, when it comes to extra business expenses the ASBPT policy covers up to $5,000,000. That will fund a considerable number of temporary classrooms plus other items needed for the school to begin again.

 

The ASBPT policy is in place to protect schools from a disaster; being there for schools in times of need rings true in our motto “For Schools, By Schools.”

 

A disaster can be made even worse if you have to go to the tax payer to pick up part of the construction costs because the district was underinsured. Review your coverage levels and have them set where you are comfortable that you are protecting the taxpayers’ assets.

 

While I was Business Manager in the Hot Springs School District we came within a whisker of having the auditorium lost to fire twice and the high school once.

 

It would have been devastating, but we had ASBPT Property/Liability insurance and I knew I would not have had to go to the taxpayers to help finance the cost of replacing the buildings.

 

Be prepared for those potentially catastrophic events and review our own situations by ensuring coverage is current and maintained to protect the taxpayers.