Insurance Protection

Most IHEs likely have purchased educators’ legal liability (ELL) insurance policies—which is somewhat of a hybrid of traditional directors and officers (D&O) and errors and omissions (E&O) coverages.  A key coverage in these kinds of insurance policies is insurance for defense costs incurred as a result of litigation.  Although the specific insurance policy always needs to be reviewed, almost all such liability policies will include coverage for defense costs for both the IHE and usually individual trustees, directors, and officers.  Some key points follow:

• Review of insurance coverage on the front end, especially in our current context, can help reduce the risk for disputed claims later. 
• Any entity facing a “government investigation” should seek coverage for their defense costs, which are often the most significant expense arising out of such “claims.” Doing so can be critical to protecting the insured entity’s balance sheet.
  
  • Insureds—whether the entity or individuals (including “trustees” and “directors or officers,” or “employees” who are not necessarily a director or officer)—should promptly give notice and demand coverage for defense costs and any potential liability.  Let the insurer say “no.” 
  • If the insurer denies coverage, the insured should push back.  Most insurers often count on policyholders accepting ‘no’ for an answer.  
  • In today’s environment, insurance should be part of any risk management strategy to ensure broad and effective protection.  Review coverage limits and insurance policies generally, but also specifically with regard to coverage for investigations.  To some extent, the amount of coverage available depends on the “capacity” in the marketplace.  However, ensuring that insurance policy terms are as “tight” as possible is part of the consideration.