District Buys Insurance on Toxic Hazards

Seeking to protect itself from potential lawsuits and other financial risks, the Los Angeles Unified School District has acquired up to $100 million in environmental insurance coverage.

The 20-year policy, which will cost the district a one-time premium of $8 million, was obtained as the school board grapples with the half-finished Belmont Learning Complex downtown.

School officials said the insurance guards against financial loss from environmental accidents, unforeseen risks and evolving regulatory standards that might arise as the district seeks to build at least 100 schools by 2008. By then, the student population is expected to have grown to 776,150 from the current 700,000.

“It is a responsible, prudent course of action” that could save taxpayers millions of dollars, said David Koch, Los Angeles Unified’s chief administrative officer. “It’s difficult to acquire land in Los Angeles without some environmental risks, and this shifts the risks to the private sector.”

The citizens oversight committee for Proposition BB, which is helping pay for the policy, recommended the move in light of environmental questions at several campuses, said committee Chairman Steve Soboroff.

The most controversial project is Belmont, the nation’s costliest high school, which is situated on a former oil field and may be abandoned for health and safety reasons. The school board will soon announce a commission to weigh the project’s fate.

If the school board approves completion of Belmont, district officials said, they will consider buying additional insurance for the high school. Pending approval by the toxic substances department, the current policy could also protect Belmont from potential lawsuits.

By switching from self-insurance to the New York-based insurance carrier American International Group, officials said, Los Angeles Unified is one of the few public school districts taking a cue from businesses that purchase policies for similar protections.

“It’s a huge step in the right direction,” Soboroff said. “It provides accountability and responsibility, whereas before there was none.”

Although district officials are negotiating a payment plan, the policy took effect last week after it was unanimously approved by the Los Angeles Board of Education.

The environmental insurance consists of three types of policies, officials said. The first protects against costs associated with environmental accidents that may occur during the course of construction, for example, if the contractor spills tar and it seeps into a nearby residential complex.

The second component guards against third-party claims, such as lawsuits alleging bodily injury.

The last part is a cleanup cost cap, in which the insurance carrier covers overruns resulting from unforeseen environmental problems, technological advances or changing regulatory standards.