Donor Sued Private School Board Over Misused Funds: D&O Insurance Defended Them
The $5 Million Donation and the Lawsuit That Followed
A major donor gave our private school $5 million specifically to build a new theater. The school’s board later decided to use the funds for a more urgent science lab renovation instead. The donor’s family was furious and filed a lawsuit against the board members personally, alleging a breach of fiduciary duty. The school’s Directors & Officers (D&O) liability insurance was essential. It paid for the very expensive lawyers to defend the trustees against the claim, protecting their personal assets from a lawsuit over their governance decision.
Insuring Private Schools: Beyond Public School Risks (D&O, Admissions!)
The Business of Education
My friend is the headmaster of a private school. He says, “A public school is a government entity. I’m running a multi-million-dollar non-profit business.” His insurance needs are different. While he has all the same risks of student injuries, he also has risks a public school doesn’t. He needs robust Directors & Officers insurance to protect his board from donor lawsuits, Employment Practices Liability for contentious faculty contracts, and even liability coverage for the subjective, high-stakes admissions process. It’s a policy for a business, not just a school.
Private School Insurance Needs: CGL, Abuse/Molest, Property, WC, EPLI, D&O/Trustee Liab!, Auto
The Seven Subjects of Our School’s Protection Plan
Our private school’s insurance program is like a core curriculum with seven required subjects. General Liability covers student injuries on campus. Abuse & Molestation coverage is a tragic but essential prerequisite. Property insurance protects our historic buildings. Workers’ Comp is for our dedicated faculty. Employment Practices Liability (EPLI) handles tenure disputes. Commercial Auto covers our sports team vans. And Directors & Officers (D&O) Liability is the “government” class, protecting our board of trustees. A diploma in financial safety requires passing all seven subjects.
Directors & Officers/Trustee Liability is CRITICAL for Private School Boards! Governance Risks!
The Board Meeting That Led to a Courtroom
I joined the Board of Trustees for a local private school. In my first year, we had to make a difficult, unpopular decision to cut a beloved music program due to budget constraints. A group of wealthy, angry parents hired a law firm and sued the entire board, claiming we were mismanaging the school’s finances. I was terrified I’d lose my house. But the school’s Trustee Liability insurance immediately stepped in, providing top-tier lawyers to defend us. It’s the essential protection that allows volunteers like me to serve.
Liability Risks Associated with Admissions Decisions or Expulsions? EPLI/D&O?
The Rejection Letter and the Discrimination Lawsuit
A wealthy and influential family’s child was denied admission to our competitive private school. The family hired a lawyer and sued the school, claiming the admissions process was biased and discriminatory. In another case, a student was expelled for a major rules violation and the family sued for breach of contract. These are complex claims. The school’s liability policy, often through an endorsement on the EPLI or D&O coverage, is what provides the legal defense for lawsuits that challenge the school’s most fundamental and subjective decisions.
Protecting School Endowments: Fiduciary Liability Considerations?
The “Safe” Investment That Wasn’t
The investment committee for my alma mater’s $100 million endowment decided to move funds into what they thought was a safe bond fund. The fund collapsed, and the endowment lost $10 million. A group of alumni sued the school’s trustees for a breach of their “fiduciary duty” to prudently manage the funds. This specific risk is covered by Fiduciary Liability insurance. It’s a special policy that protects the board from lawsuits over the management of endowment and retirement funds, a crucial coverage for any institution with significant assets.
General Liability for Student Injuries (Sports, Labs, Arts Programs)
A World of Unique and Expensive Risks
A private school’s general liability risk is incredibly diverse. A student could be injured by a lacrosse stick in gym class, get a chemical burn in a state-of-the-art chemistry lab, suffer a fall in the dance studio, or get hurt building a set in the theater program. Each specialized program, often a key selling point for the school, brings its own unique set of hazards. A robust General Liability policy is essential to cover the wide variety of potential injuries that can happen in these enhanced educational environments.
Abuse & Molestation Coverage: Essential Protection for Students & Reputation!
The Most Important Policy We Buy
The head of our private school says the first policy she reviews every year is their Abuse & Molestation coverage. She says, “An allegation, even a false one, can destroy a private school’s reputation and trust with its paying parents overnight.” Getting this standalone policy requires a rigorous audit of the school’s background check procedures, supervision protocols, and abuse prevention training. It is the most difficult and most expensive coverage to secure, but for a private school, it is the absolute bedrock of their risk management.
Comparing Insurance for Different Types of Private Schools (Religious, Independent, Boarding)
The Risks of a Day School vs. a 24/7 Boarding School
A local, independent day school has a certain set of risks. But a prestigious boarding school has a risk profile that is exponentially greater. The boarding school is acting “in loco parentis”—in the place of a parent—24 hours a day. Their liability for dorm life, weekend activities, and student health is immense. A religious school has its own unique risks related to its mission. The insurance for each type of private school has to be highly specialized to match its unique operational and legal duties.
Property Insurance Covering Historic Campuses or Specialized Facilities
Insuring a Building That’s a Landmark
Many private schools are located on beautiful, historic campuses with buildings that are a century old. A fire in one of these buildings would be a tragedy. The school’s property insurance has to be a special type. It needs to have a “historic replacement cost” valuation, which pays the much higher cost to replicate the original slate roof and custom woodwork, not just rebuild with modern materials. It’s insurance that protects the unique character and history that are a core part of the school’s identity.
Filing Claims Related to Student Conduct, Safety Incidents, or Board Decisions
From the Headmaster’s Office to the Claims Adjuster’s Desk
When a serious student injury or a major board decision that could lead to a lawsuit occurs at our private school, a formal process begins. The headmaster creates a detailed, confidential report. That report goes to the school’s business manager and their legal counsel. They, in turn, formally notify the insurance broker and carrier to open a file. This creates a documented, legally privileged trail. It ensures that when a sensitive claim arises, the communication is handled professionally and strategically from the very first moment.
Sending My Child to Private School: Considering Their Unique Insurance Needs!
The Tuition Bill is Also an Investment in Their Safety Net
As I write the $40,000 tuition check for my daughter’s private school, I think about what I’m really buying. It’s not just smaller class sizes and better programs. I’m also buying into what I hope is a higher standard of care and safety. I trust that a portion of my tuition payment goes towards a massive, comprehensive insurance program. That insurance is the financial safety net that ensures the school can protect its students, its faculty, and its own future.
Workers’ Comp for Private School Faculty and Staff
The Pressures of a Demanding Environment
The faculty and staff at a private school face unique workplace pressures. A chemistry teacher could be exposed to chemicals, a drama teacher could fall while working on a set, and an admissions officer could get carpal tunnel from processing thousands of applications. I’ve also seen teachers go out on stress leave due to intense pressure from parents. The school’s Workers’ Compensation policy is the mandatory coverage that responds to all these scenarios, protecting the dedicated employees of the institution.
International Student Programs or School Trips Abroad: Liability & Travel Insurance Needs
When Your Campus Extends to Another Continent
My nephew’s private school prides itself on its international programs. He went on a two-week school-sponsored trip to Peru. For this, the school needs a specialized insurance program. It includes Foreign Liability coverage to protect the school from a lawsuit if a student is injured overseas. It also often includes a group Travel Insurance policy for the students themselves, which covers emergency medical evacuation and trip cancellation. It’s a crucial layer of protection when your educational mission crosses borders.
Finding Insurers Experienced with Independent and Private School Risks
Our Agent Knows a Trustee from a Teacher
A private school cannot be insured by a generalist. They need a broker who specializes in the “educational institutions” market. This type of broker understands the difference between a board of trustees and a public school board. They know the unique liability of admissions and tenure decisions. They have access to the handful of insurance carriers who have dedicated underwriting teams for private schools. They are an essential partner in navigating the complex and unique risk landscape of private education.
Cyber Liability Protecting Student/Family Data and Online Learning Platforms
The Hacker Who Stole Our Donor List
A private school’s database is a treasure trove for hackers. It contains the personal and financial information of wealthy parents and alumni. Our school’s network was breached, and the hacker stole our entire fundraising and alumni database. The reputational damage was immense. Our school’s separate Cyber Liability policy was crucial. It paid for the forensic IT work, the notifications to our high-profile community, and the public relations firm to manage the crisis.
Coverage for Fundraising Events or Alumni Gatherings?
The Gala, the Guest, and the General Liability Claim
Our private school hosts a large annual fundraising gala at a hotel. It includes an open bar and a silent auction. Before the event, our business manager calls our insurance agent to secure a “special event liability” policy. This temporarily increases our liquor liability limits and extends our coverage to the off-campus hotel venue. It’s a vital step to ensure that our most important fundraising event doesn’t turn into our biggest and most expensive liability.
Protecting Against Claims of Educational Malpractice? Generally Not Covered.
The Lawsuit That Claimed We Didn’t Teach Well Enough
A group of parents sued my friend’s expensive private school. They claimed the school did not deliver on its promised educational quality and that their children failed to get into top colleges as a result. This is an “Educational Malpractice” claim. This is a very difficult area, and these claims are almost always excluded from standard insurance policies. Insurers will defend a school for an injury, but they are very reluctant to cover claims that question the quality of the core educational product itself.
How Accreditation Standards Interact with Private School Insurance Requirements
The Accreditation That Required an Insurance Audit
When our private school went through its ten-year re-accreditation process, the visiting committee didn’t just look at our curriculum. They asked for a full review of our insurance program. The accreditation standards required us to show proof of adequate liability limits, D&O coverage for our board, and a policy for abuse and molestation. It was a clear signal that the leading educational bodies view a strong, comprehensive insurance program as a fundamental component of a well-run and responsible school.
Private School Insurance: Securing Your Institution’s Mission and Future
The Financial Endowment That Protects the Educational One
A private school’s mission is to provide an exceptional education, often supported by a financial endowment. A comprehensive insurance program is the other, equally important endowment. It’s a financial endowment of protection. It shields the school’s assets, its people, and its reputation from the immense risks of modern life. It’s the security that ensures the school can continue to fulfill its educational mission for generations to come, regardless of the unexpected challenges it may face.