Central Florida school districts gamble with limited hurricane-insurance coverage
Jul 4, 2012
The following article was published in the Orlando Sentinel on July 4, 2012:
By Dave Weber
School districts across Central Florida are betting that a hurricane won’t hit here and cause more damage than their meager insurance policies cover.
And if we do get hit, school leaders are counting on the federal government to bail them out.
Rising insurance premiums, officials say, have forced them to reduce coverage to a fraction of building values. Orange, Seminole, Lake, Osceola and Volusia county school districts all have scant insurance against big storms.
Districts are relying on the Federal Emergency Management Agency to open its checkbook for school repairs, which could run to billions of dollars across the state if a major storm strikes. FEMA has helped school districts cover hurricane losses in the past but can’t promise what its contribution would be next time.
Mary Olsen, a FEMA spokeswoman, cautioned that “counting on federal assistance is not a prudent substitute for maintaining adequate insurance coverage.”
But school districts throughout Florida are facing an insurance squeeze.
In Orange County, school buildings totaling $4.3 billion in value have only $30 million in coverage for hurricanes and other named storms, such as the recent Tropical Storm Debby.
That’s as if a home valued at $430,000 had only $3,000 of insurance coverage.
“I believe it is adequate,” said Pat Hafer-Plunkett, director of risk management for Orange schools, which is paying one of the highest premiums for the least coverage among the five area school districts.
“The likelihood of an entire school building being totally destroyed by a hurricane is not too prominent,” she said. “And when you scatter the loss over 190 buildings, the likelihood of those getting totally destroyed is not too high, either.”
Orange’s storm insurance premium is up 8 percent this year to $2.6 million. Officials increased the deductible to avoid paying more and are looking to FEMA for backup.
In Seminole, school officials are not comfortable with the $50 million in coverage they approved last week for the school year starting July 1. That’s down from $150 million in coverage this past school year and $200 million the previous year.
“It is an issue of affordability,” said George Kosmac, deputy superintendent of Seminole schools.
Kosmac said that keeping storm coverage at $150 million would have cost twice as much this year.
“We couldn’t afford that, so we ratcheted down the coverage to $50 million,” which still cost 21 percent more than last year, he said.
Seminole is also counting on FEMA to come to its rescue, although Kosmac is concerned about restrictions that the federal agency also points out.
“FEMA does kick in, but only if you have purchased a reasonable amount of insurance,” Kosmac said.
Kosmac and other area school officials say insurance companies are hiking premiums because the odds of future claims increase for every year the districts escape a bad hurricane season. As insurance costs go up, districts are forced to reduce coverage.