Like most states, California's school budgets are under extreme pressure. Teachers are bearing the brunt of rising healthcare and retirement costs, while infrastructure is failing without sufficient funds to make necessary repairs. Putting a dent in what schools are paying to settle liability claims would help keep dollars focused where they should be – in providing quality education for our children. But what is the true impact of those claims?
Martin Brady, executive director of Schools Insurance Authority (a California Joint Powers Authority of 36 K-12 public schools) recently began an effort to evaluate the impact of general liability claims on California K-12 public institutions with the hope of exploring the implementation of tort caps. Martin enlisted the help of Aon, and together they reached out to K-12 leaders from around the state to gauge interest. This resulted in overwhelming support and the creation of a consortium of dozens of California K-12 pools and large stand-alone districts. Efforts are now underway to aggregate loss data. Over the past few months, an actuarial team led by Mujtaba Datoo, Aon's public sector actuarial practice leader, has been collecting data on K-12 losses with incurred values of over $1 million.
The participants in the study represent approximately 60% of California's K-12 Average Daily Attendance (ADA). Over the past 10 years, the participating entities have generated 112 losses with incurred values in excess of $1 million. The total incurred value on these claims is approximately $356 million. Estimating and including the remaining 40% of the state's ADA would increase the totals to 187 claims and $593 million in losses, or approximately $60 million per year.
As we delve deeper into the data, we have uncovered several indicators that are quite compelling: less than 1% of the total number of claims is generating over 45% of the total incurred. Also, over 1/3rd of the claims and incurred losses involve molestation allegations, which are on the increase. To further exacerbate that trend, there is currently proposed legislation in the California State Senate to "eliminate the time limit for commencing an action for recovery of damages suffered as a result of childhood sexual assault."
*The views and opinions expressed in the Public Risk Management Association (PRIMA) blogs are those of each respective author. The views and opinions do not necessarily reflect the official policy or position of PRIMA.*