FISCAL NOTE

Date Requested: June 13, 2019
Time Requested: 04:27 PM
Agency: Risk and Insurance Management, Board of (BRIM)
CBD Number: Version: Bill Number: Resolution Number:
4204 Engrossed sb1039
CBD Subject: Education (K12)


FUND(S):

2363 - Public Entity Insurance Trust Fund

Sources of Revenue:

Special Fund

Legislation creates:

Increases Revenue From Existing Sources



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


    The proposed legislation indicates that beginning with FY2020, the Board of Risk and Insurance Management (BRIM) shall provide higher liability insurance coverage, increasing from $6 million to $6.25 million, for county boards of education. The underlying liability coverage limit retained by BRIM increases from $1 million to $1.25 million, as provided in the bill at section 29-12-5a(c). The cost for this additional coverage and providing $5 million of excess coverage would be approximately $500,000 per year, beginning with FY 2020. The estimated cost to provide the additional coverage to the county boards of education should be recovered through supplemental premium billed for FY2020.
    
    Beginning with FY2021 certain public charter schools established pursuant to section 18-5G-1 et seq. of this code can elect to obtain coverage from BRIM with the increased combined limit of $6.25 million. The cost for this coverage and providing the excess of $5 million would remain at approximately $500,000 per year. The premium revenue collected from both the county boards of education and public charter schools would also increase by $500,000 to recover the additional estimated cost of coverage.
    
    BRIM does not currently maintain any exposure data related to public charter schools as described in the legislation. The combined entities covered by BRIM's liability insurance program should see no change in total student enrollment for country boards of education and public charter schools combined and should not increase or decrease as a result of student enrollment in the public charter schools. Any increase in the number of teachers, administrators and other school personnel that would interact with students as a result of the creation of public charter schools could increase liability exposure. However, without exposure data and an actuarial opinion, BRIM is unable to quantify this.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2019
Increase/Decrease
(use"-")
2020
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 500,000 500,000
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 500,000 500,000


Explanation of above estimates (including long-range effect):


    There are several reasons for the estimated $500,000 increase in costs/expenses:
    1. The higher retained limit would invite additional claims activity and higher payouts than the available historical claims activity would indicate.
    2. Higher limits would mean more year over year dollar variability in claims activity.
    3. Sexual molestation and abuse claims in the primary retained limit of $1.25 million would increase the claims amount paid.
    
    Revenue would need to increase by approximately $500,000 in order to recover the additional costs/expenses related to increased claims dollars.



Memorandum


    BRIM suggests the $250,000 increase to the primary layer is unnecessary, given the claim history of the boards of education, the expected increase in cost, and the already-required $5 million excess policy. In addition, rates for FY 2020 have been developed and BRIM cannot unilaterally change the terms of the policy renewing on July 1, 2019 but would have to work with the carrier to endorse the policy for this change. If this provision remains in the bill, BRIM suggests an effective date of July 1, 2020 for the increased retained limit.



    Person submitting Fiscal Note: Mary Jane Pickens
    Email Address: maryjane.pickens@wv.gov