Social Inflation Strikes Again!
This week, I am departing from discussing regulatory change to share valuable insights from the United Educators 2025 Large Loss Report. The Large Loss Report “summarizes 54 publicly reported major damage awards and settlements that affected K-12 schools, colleges and universities in 2024.”
I look forward to this report every year, as it:
Identifies patterns in large claims/losses across educational institutions
Provides detailed information on significant losses
Highlights risks that may need more attention
Helps institutions in identifying emerging risks and potential prevention strategies
Informs institutions about policy and legislative updates
For this article, I will focus on claims specific to higher education. I also want to point out that most losses in this report do not involve United Educators (UE) members and the report summarizes claims that cost $2.5 million or more.
✨Let's unpack this report!✨
Claims continue to become more expensive
The United Educators loss threshold has once again been increased to showcase how expensive claims have become. In 2021, the large loss definition threshold was $500K; now, it's at $2.5 million. This 400% change demonstrates the impact of social inflation.
Social inflation as a driver
For those unfamiliar with social inflation, social inflation refers to the rising costs of insurance claims above and beyond regular economic inflation. Defense costs are a significant contributor, and when you add large jury awards (a/k/a nuclear verdicts) to the mix, you end up with costly claims. United Educators also highlights the following factors as contributing to social inflation:
There is a societal shift towards skepticism of higher education and the desire for increased accountability
Increased advertising by attorneys soliciting plaintiffs
Third-party litigation financing has increased.
Increased legislative risk
Breaking down the losses
There are several staggering verdicts and settlements contained in this report. From antitrust to whistleblowers, there are a lot of valuable insights but I will focus on three loss categories that stood out.
Sexual misconduct is a top risk
Sexual misconduct continues to drive significant losses. The following settlements demonstrate how "mishandling" allegations, poor record keeping, and lack of transparency can be costly.
University of North Carolina School of the Arts reached a $12.5 million settlement related to allegations from 65 alumni who said sexual misconduct occurred at the university over several decades.
Eastern Michigan University reached a nearly $7 million settlement in a Title IX lawsuit brought by two dozen current and former students who alleged the school mishandled their sexual assault complaints.
University of Maryland, Baltimore County (UMBC) reached a $4.1 million settlement with the U.S. Department of Justice related to allegations of sexual assault and discrimination by the head Swimming and Diving Coach.
Antitrust had a big year
Several private universities reached settlements ranging from $18.5 million to $55 million to resolve allegations that they colluded on admissions violations and financial aid decisions. Antitrust lawsuits are on the rise primarily because of the rising cost and mistrust of higher education. United Educators has shared a helpful white paper on mitigating this risk.
Campus safety is paramount
Maintaining a safe campus, watching for red flags, and the importance of threat assessment were all central themes to these lawsuits:
A jury found the University of Washington liable for $16 million in a case involving a cyclist and his family.
The University of Virginia reached a $9 million settlement related to a 2022 campus shooting that killed three football players and wounded two other students.
The Arizona Board of Regents reached a $2.5 million settlement with the family of a slain University of Arizona professor.
Build a Risk-Aware culture
Supporting a culture of risk management from the top-down is critical. Risk management is more than a department and requires active participation at all levels within an institution. By incorporating risk management principles into your daily operations, you can better identify and assess potential threats to your institution's mission. Partnering with your Risk Management department, being a member of URMIAnetwork (University Risk Management and Insurance Assn) and leveraging insights from your insurance carrier can further enhance your risk management program. Adopting a robust risk management strategy at the board and fiduciary level ultimately showcases your institution's commitment to safety and reinforces stakeholder trust.
