INSURANCE ARRANGEMENTS FOR VOLUNTARY AIDED (VA) SCHOOLS

 

Background

 

1.         This paper clarifies the principles to be applied to arranging and funding insurance cover for school premises and other insurable risks at VA schools, given the recent liabilities and funding changes. However, detailed insurance arrangements remain for VA schools to resolve, in conjunction with their Local Education Authority (LEA) and Diocese (where appropriate).

 

Changes to Premises Liabilities

 

3.         From 1 April 2002, VA school governing bodies took over the responsibility for most capital expenditure that was previously the LEA’s (except playing fields and buildings on them), but the governing bodies no longer have any responsibility for revenue repairs.  The normal rate of capital grant support was increased from 85% to 90%.

 

Pre-April 2002 Arrangements

 

Insurance Arrangements

 

4.         The insurance implications of the changes to premises liabilities will have varied across the country, depending on the nature of the previous arrangements. For example, before 1 April 2002, some VA school governing bodies insured only the value of their 15% contribution to certain capital liabilities, whilst others insured the full value of the buildings, including those parts (e.g. kitchens) which were the LEA’s liability, with many variations in between.

 

Funding of Premiums

 

5.         LEAs will have operated varying arrangements for funding property etc insurance premiums at VA schools.

 

Issues

 

Premises Insurance

 

6.         For premises insurance, the key issue is the changed liabilities and funding arrangements.  For liability insurance, whatever the local arrangements, LEAs and schools/Dioceses must ensure that any particular factors applying to VA schools alone are properly allowed for in any insurance cover.

 

Funding of Premiums

 

7.         The various Education Acts from 1944 onwards have made it clear that the statutory duty on the LEA to ‘maintain’ a VA school is the same as for any other maintained school in all respects other than ‘premises’ (see next paragraph). Therefore, for all other types of insurance cover (e.g. public liability, employer’s liability, financial loss), whether the LEA either delegates funds for such insurance to its schools or retains the funding centrally, this should apply to all schools, including those in the VA sector.  Where the LEA delegates funds, it should offer the same facility to VA schools as to other schools to buy back into its local scheme or make other arrangements.

 

8.         The position on ‘premises’ was different up to 31 March 2002 due to:

·        governing bodies of VA schools having some responsibility for ‘maintaining’ the school (e.g. carrying out external revenue repairs to the main school building); and

·        uncertainty about who should pay the premiums for premises insurance, given the complex arrangements for financing capital expenditure at VA schools. 

The latter uncertainty may have led in some cases to duplicated or inadequate insurance.

 

9.   The basis of the responsibility for meeting the costs of VA schools is section 22(5) of the School Standards and Framework Act 1998.  This was amended by the 2002 Regulatory Reform Order and now reads:

“In the case of a voluntary aided school, the local education authority’s duty to maintain the school includes –

(a) the duty of defraying all the expenses of maintaining it, except any expenditure that by virtue of paragraph 3 of schedule 3 is to be met by the governing body…”. 

 

10.       The expenditure to be met by the governing body under paragraph 3 of Schedule 3 now relates exclusively to capital expenditure, whereas previously the Act referred to “the expenses of discharging any liability incurred by or on behalf of (the governing body) in connection with the provision of premises”.   As a result, any previous uncertainty with regard to insurance has been removed, the LEA’s duty to maintain a VA school extending to premises insurance cover.  VA schools should also be treated in the same way as other maintained schools in relation to providing for any revenue premises losses (i.e. those below the capital de minimis level).

 

Issues

 

Premises Insurance

           

11.       Ideally cover would be provided through a single insurance policy, identifying all parties with an insurable interest, together with their respective levels of risk and liabilities for insurance premiums.  Whatever the arrangements, the level of the VA school governing body’s liability should be limited to 10% of the replacement cost of the whole of the school premises, or of any individual loss, excluding the values of:

·        any buildings on playing fields and related to their use;

·        any revenue premises losses below the de minimis level for capital purposes (which may also be below the level of any excess applicable under an insurance policy).

 

12.       However, it is important that the value of the premises liabilities fully reflects the total reinstatement cost of the premises and its contents:

 

·        the LEA should either meet 100% of the premium cost for its liabilities or self-insure for that value;

·        the VA school governing body should insure 10% of its liabilities, the DfES interest being noted for the residual 90%.

 

13.       Where a VA school makes a claim under the policy, the DfES will normally provide capital grant for the 90% balance of the costs.  This might come from existing Devolved Formula Capital or LEA Co-ordinated VA Programme (LCVAP) allocations (if readily available) or by emergency funding from a contingency reserve.

 

14.       Even though the governing body need only insure 10% of its premises liabilities, it is essential that proper security measures are taken to protect the premises and, more generally, appropriate risk management advice to ameliorate losses is accessed.

 

Liability Insurance

 

15.       For employer’s liability insurance, because VA governing bodies employ most (if not all) school staff, but are not exempt bodies under the relevant legislation, the liabilities are theirs. Again, the insurance arrangements must properly reflect this and ensure that an appropriate employer’s liability certificate is issued in the name of the governing body. The impact of this will, however, particularly depend on whether the LEA arranges the related insurance cover under its scheme or ‘self insures’ it.  For public liability insurance, the only difference compared to other schools should be for any parts of the premises which are used exclusively for non-educational purposes.  Such liabilities rest with the governing body and/or the Diocese, depending on the local situation, and any insurance arrangements must reflect this. 

 

Funding of Premiums

 

16.       For the reasons given earlier, the responsibility for funding insurance premiums for VA schools rests exclusively with LEAs.  They should either meet such costs centrally (where insurance is not delegated) or ensure appropriate amounts are delegated to reflect the likely premium costs incurred by the governors on all educational purposes.

 

The Proposed Principles

 

17.       The general principles we consider should apply to insurance arrangements for VA schools, irrespective of how the insurance cover is provided, are as follows:

·        for premises insurance:

q      the total value insured should be the full replacement cost of the buildings and contents;

q      the total value should be split between the school and the LEA to reflect their respective responsibilities for particular aspects of capital and revenue expenditure;

q      the premium (or equivalent cost) borne by the governing body for its responsibilities, but funded by the LEA, should relate only to 10% of the governing body’s share of their total value;

q      the interests of the trustees and the DfES should be noted on any insurance policy, as well as those of the school and the LEA;

q      in connection with any claim, the DfES will provide the remaining 90% costs, and this funding might come from existing Devolved Formula Capital or LCVAP allocations if readily available.

·        for public liability insurance, the sole interest of the governing body for those parts of the school which are used exclusively for non-educational activities should be noted, together with the joint interests of the school and the LEA in all educational activities;

·        for employer’s liability insurance, the interests of the governing body as the main employer of school staff must be noted, and an appropriate certificate issued in its name;

·        for other types of insurance e.g. motor, supply teacher cover etc the same arrangements should apply for VA schools as for other types of maintained school;

·        the funding responsibility for insurance premiums at VA schools should rest wholly with the LEA, except for the 90% element of the governing body’s responsibilities for premises insurance (which will be met by DfES grant); 

·        the LEA must either make appropriate insurance arrangements itself, if insurance is not delegated, or delegate appropriate funds for the VA school to make its own arrangements, either externally or by buying back into the LEA’s scheme or both;

·        each VA school should undertake a full risk management assessment and keep this under regular review, in particular taking appropriate security and other measures to minimise the likelihood of claims being made.      

 

 

 

DfES

November 2002