General Liability or Student Accident?

By John M. Drye, Esq. and Dwight Condrey

As you know, the Commercial General Liability (CGL) policy agrees to pay on your behalf all sums that you become legally obligated to pay. The CGL is primarily a third party policy designed to cover your negligence when it is the proximate cause of bodily injury or property damage to a third party. In general, negligence is the failure to meet one’s duty to exercise reasonable care (defined as ordinary care any reasonable and prudent person would provide). In order for a third party to be indemnified for their loss under your CGL, it generally requires that they bring a lawsuit against you (except Medical Payments-see below). When such negligence is proven in court, the sums the policy pays on your behalf are compensatory and punitive damages. They also include general damages which most frequently are amounts the court orders be paid to compensate the injured party for their pain and suffering. Punitive damages are awarded as punishment when the conduct of the insured is grossly negligent. The purpose of punitive is to punish the insured and discourage similar behavior by them and others in the future. Under your CGL, there is also the Medical Payments Coverage Part that pays medical expenses caused by an accident occurring because of your operations or on your premises. The policy pays up to a small limit (usually $5,000) and this amount is paid regardless of fault. It generally has an exclusion for any person taking part in athletics.

As you can see, the CGL is one remedy for indemnifying parents for student injuries at school or during school activities. It does not take care of athletic injuries, nor is it designed to handle routine student injuries efficiently and expeditiously. It is primarily designed to provide an affordable and dependable remedy for an insured when their negligence is the proximate cause of a loss for a third party.

The Student Accident Policy is a first party policy designed for the express purpose of indemnifying parents for medical expenses incurred due to injuries occurring at school or during school activities. These policies can be designed to pay the actual expenses incurred (subject to usual, customary and reasonable standards) up to limits as high as $5 million per injury. The insured also chooses deductible amount, dental injury limits, accidental death and dismemberment principal sums and whether to include coverage for interscholastic athletic programs.

The Student Accident Policy is another option available to you for effectively dealing with student injuries. A few schools elect to retain this risk, some transfer this risk to the CGL, while many buy a Student Accident Policy. Of the few schools that elect to retain the risk, the majority probably have the financial capability and the administrative resources to do so. Apparently, the schools that transfer it to the CGL have no athletic programs and have concluded that $5,000 of Medical Payments Coverage under the CGL is adequate for non-athletic student injuries. Regardless of the reason, we would urge the school to consider the bigger picture and consider both the direct and indirect benefits of having a Student Accident Policy. The chart below does a good job of comparing and contrasting the CGLs and Student Accident Policy’s response to student injuries: