LAUSD Buys $100-Million Insurance Plan

Seeking to protect itself from potential lawsuits and other financial risks, the Los Angeles Unified School District has purchased $100 million in environmental insurance coverage, which could apply to the Belmont Learning Complex near downtown Los Angeles.

The 20-year policy will cost the district a one-time premium of $8 million.

School officials said the insurance will be a safeguard against financial loss from environmental accidents, unforeseen risks and regulatory standards that might arise as the district seeks to build at least 100 schools by 2008. At that time, the student population is expected to swell to 776,150 from the current 700,000.

“It is a responsible, prudent course of action” that could potentially save taxpayers millions of dollars, said David Koch, the LAUSD’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.”

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, which purchase policies to reduce environmental risks.

Representatives from the insurance company declined to comment, citing client confidentiality.

“It’s a huge step in the right direction,” said Steve Soboroff, chairman of the Citizens Oversight Committee for Proposition BB bond money, which will help the district fund the policy. “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.

Soboroff said the Proposition BB committee recommended acquiring an insurance policy because it lacked confidence in the district’s ability to build so many schools in light of environmental questions at several existing campuses.

The most controversial is the half-finished Belmont center, the nation’s costliest high school, which was built on an oil field and may be abandoned for health and safety reasons. The state Department of Toxic Substances Control, or DTSC, is testing the site, and, if it’s environmentally feasible, may approve a remediation plan for an undetermined amount.

If the school board approves completion of Belmont, district officials said they would consider buying additional insurance for the high school. The current policy could protect Belmont from potential lawsuits, pending DTSC approval.

The environmental insurance program consists of three types of policies, officials explained. The first part protects against costs associated with environmental accidents that may occur during 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.

“This program gives the district essential protection for its future land-acquisition activities,” said Steven Miller, LAUSD’s insurance and risk-management consultant.

In the San Fernando Valley, Los Angeles Unified officials are primarily searching for property east of the San Diego Freeway and north of Oxnard Street to build at least six primary centers, three elementary schools, two middle schools and two high schools.