University insurance costs rise in wake of Moffet laboratory fire

University insurance rates more than doubled this year, sharply cutting into a budget already hurt by a weak economy, University treasurer Christopher McCrudden said this week.

University insurance policies have gone up by $700,000 since last year and "will undoubtedly put a lot of pressure on the budget," McCrudden said.

The University had expected an increase this year but did not anticipate rates going up as much as they did, now making them the largest single expense for the University, he said.

The University will now have to cut costs or increase income to pay the higher rates, he said.

Insurance rates nationwide increased considerably during the last year largely because of Sept. 11. The financial cost of the attacks was estimated between $35 billion and $50 billion. The federal government has moved to ensure that possible future terrorist attacks do not bankrupt insurance companies that receive large claims. In addition, many insurance companies have limited how much clients can request for losses due to terrorism.

Most companies have been dealt 20 percent and 30 percent increases in insurances bills this year, according to the Council of Insurance Agents and Brokers.

But the increase in the University's insurance costs seems unrelated to terrorism.

Though general market forces have contributed to the increase, the main reason is that the University could no longer tell insurers it seldom filed claims, McCrudden said.

A fire early Dec. 12 caused $2 million worth of damage to Moffet Lab, a DNA-sequencing facility near Guyot Hall. Though insurers covered most of the losses after the University paid a deductible, the incident led to insurers increasing their rates.

The University holds two main policies, one to protect against suits and the other to replace damaged or destroyed property. Property insurance rates jumped to slightly more than $1 million this year from $500,000 last year, McCrudden said. Liability insurance has tripled from under $100,000 last year to just under $300,000 this year, he said.

Specific University buildings did not undergo rate increases because the University's policies cover the whole campus.

In contrast, public arenas nationwide have experienced large price increases because they could be convenient targets for terrorist acts.

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Though escaping higher costs associated with public arenas, the University will have to give more details about the occupancy of campus structures to insurers, McCrudden said. In addition, Public Safety and the police will increase their presence "slightly" at tomorrow's first home football game, said Donald Reichling, acting associate director of Public Safety.

Insurance rates for colleges and universities have been drifting higher for several years. In 2000 a fire at Seton Hall, a Catholic university located about 60 miles from the University, killed three students and injured nearly 60.

The University also has insurance policies for health care.