SENATE BILL REPORT

SB 6501

BYSenators Bailey, Rinehart, Gaspard, Lee and Bauer

Authorizing pooled insurance agreements for school and educational service districts.

Senate Committee on Education

Senate Hearing Date(s):February 3, 1988

Majority Report:  Do pass.

      Signed by Senators Bailey, Chairman; Kiskaddon, Vice Chairman; Bauer, Bender, Benitz, Gaspard, Lee, Rinehart.

Senate Staff:Don Bennett (786-7424)

                  February 12, 1988

AS PASSED SENATE, FEBRUARY 11, 1988

BACKGROUND:

School districts have been faced with increasing liability insurance premiums in recent years.  Annual premiums which approach the amount of coverage have led some districts to accept the risk of loss and operate completely self-insured.

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.

Appropriation:    none

Revenue:    none

Fiscal Note:      none requested

Senate Committee - Testified: Larry Swift, Washington State School Directors Association (for)