HOUSE BILL REPORT

SB 6501

BYSenators Bailey, Rinehart, Gaspard, Lee and Bauer

Authorizing pooled insurance agreements for school and educational service districts.

House Committe on Education

Majority Report:  Do pass.  (21)

      Signed by Representatives Peery, Chair; Spanel, Vice Chair; Appelwick, Betrozoff, Butterfield, Cole, Cooper, Ebersole, Fuhrman, Holland, Holm, P. King, Pruitt, Rasmussen, Rayburn, Rust, Schoon, Taylor, Todd, Valle and Walker.

House Staff:Susan Patrick (786-7111)

AS REPORTED BY COMMITTEE ON EDUCATION FEBRUARY 26, 1988

BACKGROUND:

A number of school districts have formed insurance cooperatives, as authorized by law, for primary liability coverage.  Most educational service districts coordinate and administer these joint self-insurance pools or cooperatives.

The potential loss from any single liability claim may exceed the limits of existing self-insurance agreements.  Commercially available "umbrella coverage" for excess liability is increasing in cost.  School districts have studied the prospects of self-insuring against large scale losses.  However, no current authority exists to finance the reserve required to cover anticipated claims and assess premiums based in part on the debt service for the initial reserve.

SUMMARY:

School districts or educational service districts executing interlocal cooperation agreements to form or join a pool or cooperative for joint self-insurance purposes may provide for the adjustment of premiums to reflect credits, refunds, assessments, or reassessments relating to risk and loss experience. Provisions for collection of defaulted premiums or other defaulted charges, continuing premium payments incurred after termination of insurance by a district, or complete termination of the agreement by the parties may also be included in such agreements.

Joint self-insurance pools or organizations may borrow money, issue notes or bonds, or incur other indebtedness to finance a liability insurance reserve for the payment of claims and other charges.  Debt incurred to fund a liability insurance reserve shall be apportioned among school districts so each bears its proper share of the debt. 

Existing statutory limitations on nonvoted indebtedness of school districts still apply to individual districts, but that debt capacity may be pooled to create an aggregate debt limit for the organization formed to provide joint self- insurance.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Larry Swift, Washington State School Directors' Association and Terry Palmer, Tacoma School District.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    It is important to allow school districts to provide liability protection for themselves.  The bonds would be issued by the cooperative.  This has been done in other states and is the only way to allow all districts to participate.

House Committee - Testimony Against:      None Presented.