Schools and Earthquake Insurance: A Matter of Risk Exposure and Need.

When it comes to schools and natural disasters, the risk of an earthquake is the most unsettling—and potentially the most disastrous.

Earthquakes provide little to no warning before they strike and the only gauge of their duration or intensity comes after the damage has already been done. It’s a tough proposition, especially for schools considering the rather hefty investment necessary for earthquake coverage.

So how does your school decide whether it makes sense to get coverage and to what extent?

Earthquake insurance is expensive, especially for schools in earthquake-prone areas. But if your school is struck by a strong quake, the cost of dealing with an uninsured claim can be even more damaging to your school’s finances, operations and ultimately its reputation.

The first step schools need to take is to raise this discussion to the board level. By addressing the potential risk, associated cost and whether or not the school is currently prepared to handle the aftermath of a damaging earthquake, your team will have a better understanding of what you’re up against if the worst does occur.

This conversation must include an assessment of the following:

  • What are the potential exposures?
  • How close is the school to fault lines?
  • What is the school’s likelihood to sustain damage?
  • How would the deductible be covered?

Please note that this isn’t—and shouldn’t be—a one-time decision, but rather an ongoing conversation that should take place at the very minimum of every three to five years. Your school should revisit the discussion on a regular basis as board members and strategies change.

The Federal Emergency Management Agency (FEMA) provides a good deal of information regarding Earthquake Safety at School, especially on the topic of school preparedness.

They point to several factors that your school needs to consider, such as how buildings were designed, built and furnished and any weakness that might make structures vulnerable to earthquakes.

Additionally, they recommend researching local building regulatory agencies to get a better understanding of the building codes your structures have been subject to and if they have any seismic design provisions.

It’s also good to consider nonstructural items and if they are subject to seismic weakness.

Schools need to recognize that beyond the exposure they face in terms of the building and its contents—which is what most think of when considering an earthquake—they also need to be aware of the potential disruption that could follow a bad seismic incident. Considering business interruption insurance should certainly be part of that conversation.

It is important to understand that if your school does not carry earthquake insurance and there is a claim, loss of tuition will not be reimbursed. This is a good reason to take a closer look at your enrollment contract’s language and consider what it currently discloses.

Ultimately, there are a number of proactive and due diligence decisions that need to be made, including the degree and investment of coverage and whether or not that coverage will be incorporated into your school’s insurance and risk management program.

If you have questions about earthquake coverage or anything that’s been discussed here, please don’t hesitate to contact me.

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About Cheryl McDowell

Cheryl has over 30 years of experience in the areas of insurance and risk management. With Bolton’s Education Practice Group, she works with education clients to review and improve their existing risk management and insurance programs, including coordination of forensic audits of the school’s existing risk management and insurance programs.

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