On Monday, January 14, 2013, officials for the Kentucky School Board Insurance Trust (KSBIT) announced the dissolution of the trust, and publicly announced for the first time that the trust, over a long period of time, had accumulated a deficit of 50 to 60 million dollars.

KSBIT was created in 1978 to provide insurance to Kentucky school districts through self-insured pools that covered workers compensation, property and liability claims. During that period of time KSBIT processed over 116,000 claims and incurred costs exceeding 400 million dollars, accumulating a large deficit from year to year.  

KSBIT’s deficit may become a significant problem for all Kentucky school districts.  KSBIT’s board of directors has announced plans to collect the 50 to 60 million dollars by assessing each of the school districts that procured general liability, property, and workers compensation insurance coverage from KSBIT in the deficit years.  Any school district which was a policy holder in the workers compensation pool from 1990 to 2011, and any district which was a policy holder in the property and general liability pool from 1993 to 2011, are subject to the assessment.  The formula for the assessment is complicated, but will be based upon a school district’s length of service in KSBIT, the premiums paid, and the number of claims made that were attributable to the school district.  KSBIT representatives have indicated that the assessment figures will be released to school districts in the next several weeks.

ASWD attorneys are actively monitoring this new development and are working closely with our school district clients to properly address what could be a significant financial issue both in terms of the anticipated assessment and in conjunction with present and future insurance coverage.  All school districts should contact their respective Board Attorneys for assistance in assessing the risks and potential consequences to district operations resulting from KSBIT’s dissolution. 

By Mary Ann Stewart