In a year of unprecedented events, it is important to be sure you have enough coverage for the unexpected. When most people buy coverage it is assumed that the standard limits are enough. But every district is different. The basic limits are really intended as the start of a conversation rather than the end. The amount you need will depend on so many factors, like the type or size of your district.
So How High Should Our Limits Be?
People ask this often. Like we said, it varies. But this rule of thumb always fits: your limits should be high enough to cover your assets if someone wanted to sue you for everything you’re worth.
Liability Limits
As you may already know, claims filed under state law are subject to the Colorado Governmental Immunity Act (CGIA). The CGIA places a cap on the liability faced by a public entity. These caps place tort limits at $387,000 for injury to one person and $1,093,000 for injury to multiple people in a single occurrence. This falls well within the Pool’s basic liability limit of $2 million. This might mislead you into thinking this is enough coverage, but it’s only half the story. Payouts from claims made under state statute make up only a small percentage of losses for Pool members.
Your Liability limits should be high enough to cover potentially expensive scenarios such as a sexual harassment claim. Those claims can rack up big legal fees, and the CGIA won’t protect you since these claims are often made under Federal statute. These claims have the potential to explode well into the millions. These cases can be long, dramatic, embarrassing, and destructive. Unless you’re prepared to pay big settlements and legal fees out of pocket, its best to buy up a nice cushion of extra limits.
You also need to consider incidents that happen outside Colorado. For example, let’s say a district employee is traveling by car for work to an out-of-state conference or training event and is involved in a car accident. The CGIA does not extend protection outside Colorado, so the district would be subject to another state’s laws whereby you could be held liable for much higher amounts.
After evaluating your exposure, if you feel the $2 million limit is not sufficient, you can increase that amount by purchasing Excess Liability coverage. You can buy up to $8 million in extra limits for total limits of $10 million per occurrence.
Crime Limits
Crime limits should be high enough to cover the loss of money and securities due to the actions of employees or outsiders. These types of claims include employee forgery, theft, fraudulent money transfers, and fraudulent impersonation.
We provide coverage for these types of losses but also include coverage to meet the state’s bond requirements for board members. The state sets a minimum requirement, but your district’s board may have established higher amounts.
You can manage these risks by having controls in place such as background checks, fraud detection systems, and internal checks and balances. However, these controls can fall short and leave you vulnerable. Having the right limit will give you added protection so you can sleep at night.
Our basic Crime limit is $5,000 but you can purchase limits up to $5 million, subject to underwriting approval. Consider an increase to this basic amount to provide your district with some added benefit.
Is an Increase Right for You?
Since limits are not one-size-fits-all, your needs are going to differ from those of other members. If increasing your limits is something that has been on your radar for a while, or if certain risks are just starting to keep you up at night, now is the best time to consider an increase. With renewal in full swing, you can easily request options for increased limits so that if you elect to make a change it will be in effect for your next coverage period.
Below we have created a useful table depicting how many members bought up excess limits at each tier in 2020. You can use this information to compare your district with your peers. That will help you benchmark what a good limit for your district might look like. For more detailed advice, be sure to contact your broker or the Pool.
If you would like more information, we have representatives ready to chat with you about what coverage limits are best suited to your organization. Email us at pc@csdpool.org to inquire today.
