MARYSVILLE — Next school year, the Marysville School District will lose membership in its risk management pool, a form of financial protection similar to insurance for losses like legal costs and property damage.
The board of the Washington Schools Risk Management Pool voted to drop the district in March. The termination of coverage takes effect at the end of August.
Leading up to the decision, the risk pool cited concerns including the district not keeping up its end of the bargain on a legal settlement, a recent steep rise in claims and poorly maintained buildings.
Now, the district expects to pay 30% more for insurance, according to the district’s financial plan.
It’s yet another blow to the embattled district, already dealing with severe financial challenges. In late January, district estimates put a budget shortfall at $5.9 million.
In the risk pool, school districts pool resources to manage their own claims.
Private insurers are “profit-driven businesses,” explained Larry Francois, the superintendent of the educational service district that includes Marysville. “So their motivation is to maximize premiums and minimize payouts.”
A risk pool, on the other hand, is motivated “to protect the interest of their members,” he said. “And to do so in a way where everybody shares in the risk equitably.”
Risk pool coverage is usually more generous than private insurance, he said.
Francois said he didn’t know of any districts in the state covered by private insurance instead of a risk pool.
As far as a risk pool dropping a district: “I’m not aware of that ever having happened,” he said.
Implications, Francois said, depend on whether the district finds an insurer to provide comparable coverage at an affordable rate.
At a school board meeting May 20, Superintendent Zachary Robbins called the risk pool’s move “a business decision.”
The district may contest the decision by requesting a vote of the pool’s entire membership. The pool hadn’t yet “received any notice or request for a vote of the full membership,” its attorney, Tyna Ek, wrote in an email Thursday.
“There has been a lot of work to mitigate risk” in the district, Robbins said at the meeting. “General counsel has been reviewing our district policies and procedures so we can tighten them up and just mitigate against claims.”
State funds for capital projects and a property swap with the city are “going to help us address some of our facility issues.” He added seismic upgrades at Totem Middle School are “also beneficial for mitigating risks.”
The district is working with a brokerage firm to find a new insurer. The district plans to meet with the firm in June to go over the options, he said, after which the district will pick an insurer.
In a February letter, the risk pool outlined the “unusual circumstances,” where a lawsuit against the district was settled in November “without the expected financial contribution from the Marysville School District.”
The district faced a lawsuit in 2020 related to the deadly shooting at Marysville Pilchuck High School in 2014. At that point, previous settlements had already reached the risk pool’s coverage limit for the shooting, according to the letter.
The letter refers to “prolonged negotiations” between the district and the risk pool leading up to a “mediated effort” to settle the suit in November of last year.
On Oct. 30, the risk pool’s letter said, a district lawyer “confirmed the agreement” that the pool would contribute the first $350,000 of the settlement and split the rest 50-50 with the district.
A couple weeks later, however, Marysville’s attorney told the risk pool the district couldn’t pay any of the settlement because of its “financial difficulties,” the letter said.
“While generally aware of Marysville School District’s financial difficulties, the Executive Board has questions, such as what changed between” the district agreeing to pay some amount of the settlement in late October and changing its mind in mid-November, the letter said.
A March letter warned the district its membership could soon be terminated.
District officials spoke at a February risk pool board meeting, but did not explain why the district reneged on an agreement just weeks after making it, according to the letter.
The March letter laid out concerns about the district, including “an explosion of (employment practices liability) claims in the past two years.”
Employment practices liability claims come from employees “alleging violations of their legal rights, such as discrimination, harassment, wrongful termination, and other employment-related issues,” according to the International Risk Managment Institute.
Last year, the value of such claims in Marysville was “900% higher than the average” similarly sized district, the letter said.
At last week’s school board meeting, a board member asked Robbins if the district had looked into what was happening.
“In looking at those claims, there’s nothing that jumps out as unusual,” Robbins said at last week’s school board meeting. “It’s just the business of a school district with a lot of employees being the largest employer in Marysville.”
Marysville also has open claims “that are not covered by the (risk pool’s) coverage agreement and therefore would be (the district’s) responsibility to resolve,” the letter said.
The school district currently faces two open lawsuits, according to its financial plan. One is an employment practices liability claim. The plan noted the risk pool covers those claims, adding “we have ($30 million) of coverage available and are not close to that cap.”
The risk pool’s letter also said district officials failed to report a student-to-student sexual assault allegation from 2019 to the risk pool until 2023, though officials knew about the allegation at the time.
“While timely reporting of all claims is required of our members,” the letter said, “it is difficult to imagine a type of claim that is more critical to timely report to allow (the risk pool) to promptly investigate than an allegation of sexual abuse by another student.”
The district also “has not consented to a broad inspection of its buildings,” the letter said, but “recent inspections by (risk pool) claims staff of individual buildings in response to specific claims has revealed buildings that have not been adequately maintained.”
The letter said risk pool “staff have been advised that at least part of this maintenance problem as well as our inspection limitations is a result of on-going union disagreements (the district) is experiencing.”
At last week’s board meeting, Robbins said the district has never denied the risk pool access to buildings.
School officials waited to inform the public about termination from the risk pool partly because “there is a possibility of an appeal,” he said, and partly because “this is what doing business is.”
“Every now and then, you have to change insurance carriers,” Robbins said.
In public comment, Becky Roberts, president of the Marysville teachers union, reminded the board of the union’s “no confidence” vote late last year in the superintendent and district leadership.
“Unfortunately,” she said, “there has been no real change that would lead us to reconsider our vote.”
In an email, district spokesperson Jodi Runyon wrote the district is now seeking “maximum protection at an affordable cost.”
Sophia Gates: 425-339-3035; sophia.gates@heraldnet.com; Twitter: @SophiaSGates.
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