Paul Blume's Columns - Insurance: Your Friend (November 2008)

But some friends (E&O) are better to have than others (general liability)

Miz Kristen (the Legal Diva) and I frequently get questions from board members and superintendents about whether they have insurance and what kind they should have. For that, I reserve the lawyer’s favorite answer: It depends.

For one thing, it depends on what kind of insurance you’re talking about. You’re required to have insurance on your vehicles. You also have insurance on your buildings and contents, unless you’re so much of a gambler that you roll dice to decide whether you wear clothes to work today.

It gets complicated talking about other kinds of insurance. For instance, there’s errors and omissions (also known as "E&O") coverage, which defends you and your district, employees, etc., from most types of lawsuits that do not involve physical injury. This is the insurance that some employee groups tell your employees that you don’t have, so they need to be members of (name of group) to be protected. Flagrant disingenuousness! You automatically have E&O coverage through the state without your having to pay a premium. It’s very good, but its limit for damages is $150,000 per incident. In addition, it pays your lawyer at a rate which probably requires that you pay additional hourly amounts to make up the difference.

You can also purchase commercial E&O coverage. E&O coverage kicks in when you are sued for, say, discrimination, or when that employee you fired last week decides that you didn’t do it right. The insurance company will hire a lawyer to represent you and pay that lawyer.

(Insurance seems to be in existence to a large extent for the purpose of paying lawyers. That, by the way, is a very, very good thing. And I’m being completely objective about that. Trust me. I'm a lawyer.)

We almost always recommend your district purchase E&O coverage. In this age of lawsuits in general and lawsuits against schools in particular, it’s good to have all of the coverage you can. In Arkansas, an insurance company (Midwest Risk Management Services) provides E&O coverage that is endorsed by, but not sold through, the Arkansas School Boards Association. It has a variety of coverages, and its limit is $1 million. In addition, it will cover administrative (i.e., school board and other nonjudicial) hearings. A premium must be paid, but the coverages are higher and more varied, and they pay your lawyer either his usual hourly fee or at least a lot closer to it.

Commercial E&O coverage makes the state’s coverage secondary. That is, if someone hits a home run off of you and gets the full million bucks of coverage, the state will kick in its $150,000 after that.

Then there’s general liability insurance, or fall-down-and-go-boom insurance, which most of you don’t have and which would defend you in lawsuits involving injury or other types of claims for negligence. If someone slips in your school building on the wet floor where the custodian just scrubbed the latest horror that some enterprising student left there, and the person falling down and going boom gets hurt, if you have general liability insurance, that person can make a claim against you and/or sue you for negligence in leaving the wet spot on the floor. Same if a student gets hurt on the playground. (New world alert: Nothing is little Johnny’s fault. Just ask his mommy. It’s YOUR fault for “negligent supervision." Got that?)

However, if you don’t have general liability insurance, little Johnny’s mommy can't sue you (or, at least, get a judgment against you) because of a state law, A.C.A. §21-9-301. That law makes school districts and their agents, officers and employees (you fit in there somewhere) immune from liability for negligence.

So, if you have general liability insurance, you can get sued for negligence up to the policy limit. If you don’t buy general liability insurance, you can’t get sued for negligence. How ‘bout them apples?

The only real advantage in having general liability insurance is that victims of actual negligence by a school employee can be compensated, which is a good thing for them. On the other hand – and I know you’ll find this hard to believe – I've heard of instances where a person suing wasn’t really sincere or really hurt. If you have general liability coverage, those folks can sue you too. Oh, and there’s no immunity for the things covered by E&O insurance. So forget about that.

I asked my long-time companion and advisor, Mary Margaret the Wonder Pooch, about whether schools should buy general liability insurance. She said that she’d have to have several treats and then she’d think about it. She hasn’t gotten back to me yet. Maybe the next treat will do it. I’ll let you know.

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