As coronavirus disrupts colleges, can insurance policies mitigate impact?

As the coronavirus spreads across the United States, colleges are scrambling to find contingency insurance plans that mitigate the virus' economic impact on their campuses and students.

Unfortunately, most insurance plans pay next to nothing, and new policies are incredibly expensive to purchase. For colleges, there are two common types of insurance plans: property and business.

Some property insurance plans contain sublimits, or caps on payouts for specific types of losses, like outbreaks and pandemics. As long as a college meets its deductible for the plan, it can file a claim for damages related to the outbreak.

Bret Murray, who leads higher education strategy at insurance firm Risks Strategies Company, told Inside Higher Education on Wednesday that a typical $500 million property insurance plan could include a $1 million sublimit for pandemic damages, but a college would have to prove physical damage to the campus to get that claim approved.

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"For such coverage to apply, an insured building must be contaminated and rendered temporarily or permanently unusable (in whole or in part)," Murray wrote in an email. "Some policies further require a 'civil authority' or an officer of the institution to prohibit access to an affected building for coverage to apply.​"

Business contingency plans protect against interruptions with contractors who provide services, like dining or janitorial workers. If the outbreak impacts contractors, colleges can file a claim as long as their plan includes pandemic-related disruptions.

While both these forms of insurance provide some relief, they don't necessarily cover the total cost of an outbreak like the coronavirus.

For example, the University of Colorado at Boulder, which has both property and business insurance, said it can't guarantee it will be covered against the epidemic.

“We have researched tuition loss coverage in a pandemic scenario,” said Deborah Méndez Wilson, a spokesperson for the university. “However, insurers have limited this type of coverage, have expanded exclusions, have drastically reduced limits and have increased premiums, making these plans very expensive for colleges and universities.”

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To make matters worse, Murray said that new insurance plans that could potentially include coverage for the outbreak are currently nonexistent as few insurers are willing to underwrite them.

“It’d be the equivalent of saying there’s fires approaching your house, and now you want to get fire coverage for your house,” he said. “The underwriters can see the fires approaching your house.”

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Colleges are mostly worried about the virus’ impact on the loss of tuition revenue as fall enrollment is expected to decline at universities across the country, but study-abroad and other programs are also taking a significant hit.

Kevin McClure, an associate professor of higher education at the University of North Carolina at Wilmington, tweeted Wednesday that the university could lose approximately $450,000 on canceled study abroad trips and stands to lose $2 million if it cancels summer programs.

Though it is unknown how hard colleges will be hit financially by the coronavirus, there are steps colleges can take to reduce the virus’ overall impact.

Melanie Bennett, risk management counsel for United Educators, recommends that every college create an outbreak response team made up of people in health services, housing, security, communications, food services, academic affairs, legal counsel and leadership.

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“Make sure you also review business continuity plans,” she said. “What happens if you shut down schools for a day, for a week?"

As of Wednesday afternoon, in-person classes were canceled or postponed at more than 100 universities, according to a list maintained by Georgetown scholar Bryan Alexander.