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Oklahoma school districts find buying insurance can be costly to their financial health

It’s buyer beware when it comes to school districts purchasing insurance through shared risk pools, warns Oklahoma Insurance Commissioner John D. Doak.
by Andrew Knittle and Randy Ellis Modified: June 9, 2014 at 2:00 pm •  Published: June 8, 2014
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Warning! Buying cheap insurance through school co-ops can be hazardous to the financial health of Oklahoma school districts and the taxpayers who fund them.

It’s a tough lesson that many Oklahoma school districts are learning the hard way — through the school of hard knocks.

In the Yukon school district, a tentative settlement has been reached that would require taxpayers to pay $100,000 through increased property taxes over three years to settle a bullying lawsuit. The proposed settlement, which still must be approved by a judge, came after school group insurer Oklahoma Schools Property and Casualty Cooperative folded under financial pressure, leaving former members to wonder whether assessments will be levied against them to pay off financial claims.

In Pittsburg County, a different insurance cooperative is suing the McAlester school district. The Oklahoma Schools Risk Management Trust wants a judge to declare that the district’s policy doesn’t cover damage caused by an underground pipe break that flooded Parker Intermediate School last August, necessitating about $200,000 in repairs and unexpected expenses. The break occurred the day before school was set to start. The pool insurance group wants the judge to order the district to pay the insurance group’s attorney fees, as well.

El Reno Public Schools also face major insurance issues. It’s been more than a year since baseball-size hail hammered multiple El Reno schools, but adjusters representing Oklahoma Schools Risk Management Trust’s re-insurers and the school’s damage appraisers are still far apart in how much money El Reno schools are owed for repairs. School representatives place the loss at about $8.8 million, but the insurers only want to pay $3.3 million, said El Reno Superintendent Craig McVay.

It’s buyer beware when it comes to school districts purchasing insurance through shared risk pools, warns Oklahoma Insurance Commissioner John D. Doak.

“School leaders need to know that these types of arrangements are not regulated and are not backed by a guaranty fund,” Doak said. “The last thing we want is for a natural disaster or a major lawsuit to leave multiple schools in financial ruin.”

When school districts have filed insurance claims with certain Oklahoma shared risk pools, the experience has not always been favorable. Some other shared risk pools apparently have operated quite successfully.

Tom Fisher, assistant superintendent of Woodward Public Schools, said in 2012 the school was hit with a hail storm that was so bad that officials had to stop a school board meeting several times because board members couldn’t hear over the noise of hail stones pounding the roof.

Fisher said the school’s experience with Oklahoma Schools Property and Casualty Cooperative started out well. Three sets of adjusters came out right away and filled out damage estimates.

Within a week, however, another set of adjusters appeared unannounced with a whole different attitude.

“They tried to tell us that there was no hail damage — that kids had been up on the roof with cowboy boots on kicking the roof,” Fisher said. “We called their representative ... and told him to get these people out of here.”

Reimbursements were slow and there were numerous delays, but the insurance cooperative did eventually pay for roof damage, he said. It never did pay for the thousands of dollars in damage to rooftop air-conditioners.

“It was a very long, frustrating journey with them, but we did finally get the roofs repaired,” he said. “Based on some of the other stories I’ve heard, we were rather fortunate.”

Yukon told group broke

Yukon Public Schools apparently was not as fortunate.

New Yukon Superintendent Jason Simeroth, who took over as the district’s top administrator in January, said the district paid OSPCC $638,570 in premiums for fiscal years 2011 and 2012, but were told the organization was broke when the district began looking into how to pay a $100,000 proposed settlement to a bullying lawsuit.

The plan now is to ask a Canadian County judge to approve a settlement that would require a $100,000 judgment to be put on the tax rolls and paid by district taxpayers over three years.

“That is why we switched companies … for obvious reasons,” Simeroth said. “I learned of their financial issues just before the settlement and was informed that we would have to pay the settlement ourselves.”

Simeroth said Yukon Public Schools likely will not file a lawsuit over the matter.

Jerry Needham, superintendent of Oktaha Public Schools and chairman of the OSPCC’s board of directors, said the group — which represented more than 40 schools — decided to go out of business earlier this year because of financial troubles. He blamed the troubles on a couple of catastrophic claims losses and some schools leaving the cooperative last June, resulting in the group losing about $1 million in insurance premiums.

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by Andrew Knittle
Investigative Reporter
Andrew Knittle has covered state water issues, tribal concerns and major criminal proceedings during his career as an Oklahoma journalist. He has won reporting awards from the state's Associated Press bureau and prides himself on finding a real...
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by Randy Ellis
Investigative Reporter
For the past 30 years, staff writer Randy Ellis has exposed public corruption and government mismanagement in news articles. Ellis has investigated problems in Oklahoma's higher education institutions and wrote stories that ultimately led to two...
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