School buildings insurance
The Ministry of Education has a Catastrophic Loss policy for damage to New Zealand state-owned school buildings.
Types of damage covered under this policy
The policy funds damage caused by the following types of peril.
- Earthquakes (including earthquake-triggered subsidence, ground heave, and rain damage following earthquake).
- Floods (accidental).
- Fire (accidental and arson).
- Hydrothermal activity.
- Loss or theft of school keys.
- Extreme weather events (such as heavy snow, high winds and lightening strikes).
- Spontaneous combustion.
The Catastrophic Loss policy pays for:
- Repairing damaged school buildings.
- Replacing actual net square metres lost up to the School Property Guide (SPG) entitlement.
- Replacing school locks following the loss or theft of school keys - to qualify, the school must have had a system in place to ensure that the keys were adequately accounted for, and this system has been adhered to.
- 'Business interruption costs' (eg, the cost of bringing in temporary accommodation or moving to another site while repairs are carried out).
- Contracts work under $50,000 (a minimum excess of $1,000 applies).
- Demolition of buildings not eligible for replacement.
Even though replacement of square metres is calculated on net area lost, the replacement budget allows for ancillary gross areas that need rebuilding due to the damage, such as corridors, reception areas, cleaners’ cupboards, toilets, switch rooms and computer network spaces.
Before starting any repair work, you must contact your local Ministry office. If you get the work done without first putting in a claim, your application will be declined. Refer to Making claims under the Catastrophic Loss policy.
What is not paid for out of the Catastrophic Loss policy
The policy does not cover:
- claims under $2,500
- damage to the over-SPG entitlement area of a school
- non-Ministry-funded property (including the board owned portion of joint Ministry-board owned property)
- vandalism eg, graffiti, leaving taps on, broken windows
- damage which only occurs because property has been inadequately maintained. The level of funding awarded to the school will be based on how much the repair costs would have been if the property had been properly maintained. When in doubt, this will be decided by a loss adjuster.
- replacing or repairing surplus buildings
- replacing school locks when keys have been lost or stolen due to negligence (e.g. leaving keys in the open where they can be easily stolen)
- upgrading property over and above damage repair
- repairing gradual damage which takes place over an extended period of time.
Over SPG entitlement and damage to school land
Damage to over-SPG entitlement buildings and facilities, and damage to school land, is not covered under the Catastrophic Loss policy. However, the Ministry will consider these claims on a case-by-case basis where it can be shown that these repairs are necessary for the operation of the school.
Boards cannot insure over-SPG property without the Ministry’s consent, and should consider rationalising surplus property.
The Ministry will only consider replacing a damaged swimming pool if there are no viable alternatives available to the school for delivering swimming and water safety tuition. The Ministry will take into account factors such as the number of school pools, or available community pools within the local school network when making this decision.
Joint and board-funded buildings and facilities
If buildings and facilities were built with joint Ministry and board funding, the Catastrophic Loss policy only pays out on damage to the Ministry’s share up to SPG entitlement. The board must insure its share of the building.
If the board and a community group jointly pay for buildings and facilities, make sure you have an agreement about which portion the board and community each insures. Record this in your standard agreement for third party use of school site.
Use the Ministry’s Third Party Occupancy agreements for community use of school sites. For any shared funding you must record the respective shares in the Ministry’s Property Management Information System (PMIS).
Insurance for school buildings and facilities summary
This table summarises whether Catastrophic Loss funding is available for both Ministry and non-Ministry-funded property.
|Type of property
||Catastrophic Loss policy covers actual net square metres lost, up to SPG entitlement.|
The Board should not insure the balance as there should be no need to reinstate surplus space.
|Board-funded buildings and facilities
||Board's responsibility to insure using discretionary funding. Catastrophic Loss policy does not apply.|
|Buildings jointly-owned by the Ministry and the board
||Catastrophic Loss policy covers actual net square metres lost, up to the Ministry’s pre-agreed share, or up to SPG entitlement, whichever is less.|
The board must insure the portion it funded.
|Community-owned buildings and facilities on school sites
||The insurance requirements will be covered in the third party occupancy agreement between the board and the community group. The Catastrophic Loss policy does not apply.|
|Buildings and facilities, such as halls and gyms, jointly owned by the Ministry and a community group
||Catastrophic Loss policy covers actual net square metres lost, up to the Ministry’s pre-agreed share, or up to SPG entitlement, whichever is the lesser.|
The community group must insure the portion it owns.
|Ministry owned property that is not part of a school's SPG entitlement, such as ancillary buildings, paths and swimming pools
||Normally not covered by Catastrophic Loss, but considered on a case-by-case where there are urgent health and safety issues, or where the facility is necessary for the operation of the school.|
|Any other school property that does not qualify for catastrophic loss funding
||Five Year Agreement (5YA) budget will be the first source of funding. Where this is not sufficient the school may be eligible for other discretionary funding sources.|
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Making claims under the Catastrophic Loss policy
If a catastrophic loss occurs, contact your local Ministry office.
Claims must be made within 12 months of the damage taking place in order to be eligible for Catastrophic Loss funding. This includes damage that is not discovered until some time after the catastrophic loss incident has taken place.
Each local Ministry office has a contract for emergency contractors in its area. Depending on the contract terms, either you, the Fire Service, the Police or the local office is responsible for contacting the emergency contractor.
If you’re unsure who your emergency contractor is and who makes the first contact when you suffer loss, ask your local Ministry office.
The Ministry also has a national contract for loss adjuster services for:
- claims over $10,000
- claims where there is potential to recover some, or all of the reinstatement costs from another party.
A loss adjuster is appointed by the loss adjuster firm to investigate the incident.
Who does what when a claim is made?
Local Ministry office
- Works with the emergency contractor to have the school back to business as usual within three days of the disaster.
- Organises funds for immediate remedial work.
- Liaises with the school, the emergency contractor, the loss adjuster and your project manager about the remedial work.
- Advises the school whether the building(s) will be reinstated or demolished and re-built.
- Sets up the project for the rest of the remedial work.
- Does an initial inspection of the damage and arranges for urgent work to be done to get the school functioning as quickly as possible.
- Tries to have the school back to business as usual within three days.
- Organises emergency accommodation, security and safety on the school site if needed.
- Liaises with the board, the Ministry, the loss adjuster and the project manager about the remedial work.
- Deals with claims over $10,000 and claims where there is potential to recover some or all of the costs.
- Inspects the damage.
- Investigates the cause.
- Meets with the school and identifies risk factors/hazards as soon as possible to recommend mitigation.
- Reviews security measures taken by the emergency contractor or project manager.
- Considers any third party liability and recommends possible recovery, including likely costs.
- Addresses the scope of remedial works, including the need for specialists.
- Estimates remedial work cost.
- Reports to the Ministry.
- Is appointed by the board using the procurement processes described in the Ministry’s project management requirements.
- Manages the remedial work in line with the project management requirements. The funding will be paid out as part of that process.
- May organise security and urgent repairs if not done by the emergency contractor or loss adjuster.
- Prepares the scope of works in liaison with the board, the emergency contractor and/or the loss adjuster.
- If the Ministry doesn’t receive the project management documentation within one year, the project budget will be withdrawn (unless an extension is specifically approved by the Ministry).
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Questions and answers
What happens if the damage to my school does not qualify for Catastrophic Loss funding?
The Catastrophic Loss policy does not automatically cover some assets such as paths, school land and swimming pools. If the asset is Ministry-owned and needed for the normal running of a school, the Ministry will fund its repair or replacement. The source of this funding will differ depending on the circumstances. In some cases, the best source of funding will be the school’s Five Year Agreement (5YA) budget.
The Ministry will decide whether or not to reinstate a damaged swimming pool based on availability of community facilities. The Ministry may decide not to reinstate a school’s swimming pool if there are other suitable alternatives available, such as a nearby community pool.
Can a school insure over-SPG buildings and facilities not covered by Catastrophic Loss funding?
There is no legal impediment to a board insuring property it does not own (Insurance Law Reform Act 1985). Therefore boards can insure Ministry-owned property but ownership remains with the Ministry.
Boards are encouraged to think carefully before insuring over-entitlement buildings:
- Insurance companies are only likely to pay out if the insured party can show they have suffered some economic loss.
- By rationalising surplus property, schools save a significant amount of money on the cost of maintaining aging, non-essential buildings. If they have future roll growth they will be entitled to new buildings which are better designed for modern teaching and learning styles.
- The final decision over whether (and how) the building or facility will be reinstated will be made by the Ministry as landowner and the Ministry’s policy is to not reinstate over-entitlement buildings.
If you are thinking of taking out your own insurance on Ministry-owned buildings always obtain Ministry permission before doing so. The Ministry recommends that the only non-Ministry insured school building a board should consider insuring is a large school hall or gymnasium which exceeds the school’s SPG entitlement, as these are often used as community spaces in addition to their use by the school.
How can my school reduce the risk of damage from a catastrophic event?
Good maintenance: Properly maintained buildings and fixtures are more likely to withstand the effects of natural disasters and extreme weather events. Regularly clean out guttering (and/or install gutter guards), trim trees and remove dead or unsafe trees, lag pipes in frost-prone areas and take other precautions against expected weather conditions.
Minimise flooding risks: When the school is closed, turn off water supply to urinals and ensure all taps are turned off (and not leaking). Radiators, boilers and water pipes which are not properly maintained also add to the risk of flooding. Ensure drains and sinks are left unblocked.
Minimise fire risks: Reduce the risk of arson and accidental fire by moving rubbish bins and other receptacles away from school walls and fences. Get rid of flammable substances. During holiday periods, consider locking rubbish bins away from school buildings and placing mats inside buildings (as these make a good base for fires).
School keys: Reduce the risk of losing the school’s master key, or of having it stolen by keeping it in a secure place, not within public view. Don’t label keys with the school’s name. Also, minimise the number of locks that require replacement if the master key is lost or stolen, eg have a master key that allows access to a keypad system which can then be used to unlock the rest of the school. This provides a double layer of protection to the school and means that if the master key is lost, only one lock requires replacement. Electronic swipe card systems are even more effective because a swipe card that is stolen or lost can be deactivated without the need to alter, or replace the rest of the system or change any locks.
Does Catastrophic Loss funding cover damage to trees?
Where trees cause damage to school property during a storm or other catastrophic event, the policy will fund the repair or replacement of the property that has been damaged. The funding will pay to remove storm-created debris, including the tree. The policy does not cover removing trees for convenience, or anticipated damage. Nor will it pay for damage caused as a result of poorly maintained trees, eg, if a branch falls on a building when it should have been trimmed or removed.
What qualifies as an extreme weather event?
Extreme weather events are those that are rare for the area. They are sudden, severe and destructive in nature, such as winds in excess of 100 km/hr. For a weather event to qualify as ‘extreme’, it should be unusual and destructive enough to be reported in the local or national news.
The Ministry has the final say on whether a weather event is extreme enough to qualify a school for catastrophic loss funding.
Does Catastrophic Loss funding cover damage to school property caused by hit and run drivers?
No. This type of damage should be claimed through vandalism funding. Where a hit and run incident results in a school fire (for instance, if the driver hits part of a building containing wiring and this results in an electrical fire), damage caused by the fire will be covered by catastrophic loss funding.
Does Catastrophic Loss funding have to be used to construct an exact replica of the building that was damaged?
No, as many older school buildings are no longer suitable for current learning and teaching styles. Building plans must be developed with and approved by the loss adjuster before work can commence.
Will buildings classified as ‘earthquake-prone’ be covered by Catastrophic Loss funding?
Boards must strengthen school buildings to the building performance level required by their local council. Local councils set their own building performance levels based on regional risk factors.
If a board can prove that it has taken adequate steps to fix the problem within the allocated timeframe, the building will be considered adequately maintained for the purpose of catastrophic loss funding.
For example, a school hall is declared earthquake-prone and the school is given 10 years to fix the problem. The school factors the structural strengthening work into its 10 year property plan, allowing a reasonable budget and timeframe. In this case as the school has taken clear, demonstrable steps towards resolving the problem, the hall will be eligible for Catastrophic Loss funding if damaged in a catastrophic event.
Are all ‘legitimate spaces’ covered by Catastrophic Loss funding?
Not necessarily. Legitimate spaces are used to house programmes specifically funded by the Ministry. Only a legitimate space in a school building is covered by Catastrophic Loss funding. Legitimate space in a building classed as an ancillary building is not. The building classification can be checked in PMIS.
For this reason, it is important that boards keep the Ministry up to date on any work done at a school (including any change of use of buildings which occurs) in order to ensure that the Ministry retains an accurate register of each school’s buildings and assets.