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[23] > Image [23] of Minutes of the University of Kentucky Board of Trustees, 1986-06-jul29-ec.

Part of Minutes of the University of Kentucky Board of Trustees

President Otis A. Singletary July 16, 1986 Page 2 The fact that a decision was pending was presented as an information item to the Finance Committee of the Board of Trustees at the June 24, 1986 meeting. Don Clapp has subsequently discussed our self-insurance approach with those members of the Board of Trustees who are on the Finance Committee and Council of Supervisors, and there seemed to be general understanding of and support for the self-insurance decision. There was no expressed feeling that the Board should meet to consider this matter. We had two alternatives to a program of total self insurance. The first alternative was based on an insurance quote of $1,495,500 for the occurrence type of coverage which we have had in the past. However, there were several significant differences. First, It would require us to cover the first $2.0 million per occurrence and $6.0 million in the aggregrate. These numbers were $1.5 million and $4.0 million respectively in 1985-86. Second, this $2.0/6.0 million deductible excludes legal defense costs which have historically amounted to 30-40% of total costs. Third it would exclude any punitive damages. Fourth, it did provide for $25 million in coverage as opposed to the $6.0 million coverage for 1985-86. According to the actuary we would also require a self-insurance fund of $5,002,700 under this option. The second alternative is based on a quote of $414,100 for what is now called claims-made coverage. This is very inferior coverage because it effectively limits coverage to the period of the contract. Claims filed after the contract expired would be covered only if we purchased basic insurance from the same carrier and then only up to three years. This limitation effectively excludes coverage for those most critical areas in which claims normally have an extended period of discovery(i.e., pediatrics and obstretrics cases).The total coverage under this contract would have been $5,165,000(807 of first $5.0 million and 23.5% of second $5.0 million over the $1.5/$4.0 million of self-insurance). According to the actuary we would also require a self-insurance fund of $4,869,500 under this option. The other point which I think is relevant is that the excess carriers have never paid a cent in claims under this program. We interpret the fact that the amount of self-insurance varies little whether or not we have the excess insurance to be a reflection of how little exposure the excess insurer would have. Even so the premiums have escalated to very unreasonable levels. He didn't feel the $5,165,000 in claims-made coverage was really worth consideration because of the very limited coverage, and the $25 million occurrence coverage would have required an additional $1,148,200 over that required for the total self-insurance approach. Sincerely, Peter P. Bosomworth Chancellor 051 lY