Monday, August 10, 2020
I recently received word from one of our former guest bloggers, Marcos Mendoza (whom I introduced here and who posted here, here, here, here, and here), that his most recent insurance article, The Limits of Insurance as Governance: Professional Liability Coverage for Civil Rights Claims Against Public School Districts, has been published in the Quinnipiac Law Review. It is available on SSRN here. The abstract follows.
Insurance intersects with people throughout their lives, sometimes with elements that are unobserved or misunderstood. That is often the case with “insurance as governance,” a form of private contractual regulation. This theory assumes that insurers, to minimize their financial losses, attempt to shape policyholder conduct by employing private regulatory measures, primarily through underwriting and contractual loss prevention methods. Insurance as governance is about risk reduction.
This article addresses a question regarding civil rights—do insurers influence the civil rights policies of public school districts? A broad legal arc encompasses civil rights litigation against schools, from freedom of speech complaints to sex-based claims involving students. School boards purchase professional liability insurance to defend their operational policies and actions. Previous research has not examined whether insurers attempt to shape school officials’ conduct to reduce these claims. This article finds that insurer influence is surprisingly minimal despite the financial and potential societal benefits.
Landmark scholarship (Rappaport, Harvard Law Review, 2017) established that insurers could positively influence police officer conduct, resulting in fewer civil rights claims against police entities. But this school environment research determines that insurers of public schools do not employ assertive loss prevention methods to limit civil rights claims. This lack of private regulation is because school boards want and exercise significant local control authority, and the administrators of interlocal risk pools—the leading type of insurer discussed within—have political concerns about membership stability, leading to regulatory hesitation.
This empirical study makes two main contributions. First, it involves a discussion of why insurer private regulation does not linearly increase when school district civil rights exposures rise. This contribution includes a review of the school districts’ mutual ownership of the predominant school insurer, the interlocal pool; an examination of the strong local control desires of school boards; and an analysis of the attendant political concerns of the interlocal pool administrators. Second, it reviews the policy adoption process of school boards, notes how school officials interact with and tend to resist insurers, and documents how this sociolegal setting creates insurers’ reluctance to attempt conduct-shaping with school districts regarding civil rights. This article will further private regulation scholarship regarding governmental entities and allow scholars to reassess the reach of insurance as governance.
Both this article and an earlier piece written by Marcos are cited in the new edition of Kenneth Abraham and Dan Schwarcz's Insurance Law and Regulation casebook.
I took a quick peak into the article, even though insurance is not my legal "thing." (I come from a line of insurance brokers and underwriters, but I went a different way . . . .) The article is well written and covers a lot of interesting ground. It is a tale of private ordering and regulation--or, rather, the absence thereof. On a macro level, the piece asks and answers the question: why, if insurance contracts incentivize policyholder behavior in some circumstances or with some insureds, do they not incentivize behavior in or with others? Its focus is, as the article title suggests, on public school districts as policyholders and civil rights claims as insured risks.
Although The University of Tennessee recently faced significant exposure for alleged Title IX violations (settled four years ago), I admit I hadn't thought much about the exposure of school districts to civil rights litigation. Of course, that exposure includes more than Title IX litigation. As the article notes, Section 1983 claims, Title VI claims, Title VII claims, and disability claims under the Individuals with Disabilities Education Act and Section 504 of the Rehabilitation Act of 1973 also represent potential liability threats. Overall, the level of risk is reasonably high.
Yet, perhaps not high enough . . . . In the introductory portion of the article, Marcos contrasts the regulation of public police through insurance policies (evidenced in prior literature) with the lack or failure of similar regulation of public school districts. In the conclusion, he notes, among other things, that "it seems that assertive regulation happens with public actors only when the risk exposures become extreme, and not before." He also observes that insurer, as well as insured, behaviors contribute to the creation of regulatory power through insurance arrangements. All in all, the article is an instructive read with analogies to many other areas in which common types of contracts are entered into by repeat players in a commercial or other context.