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Students cycle past Kearney Hall on the campus of the University of California, Davis, where a student has shown symptoms of coronavirus.

Getty Images/The Washington Post

As COVID-19 -- the disease caused by the novel coronavirus -- spreads across the United States and the world, colleges are creating outbreak contingency plans, canceling study abroad programs and shoring up their financial safety nets.

But outbreaks pose a particular challenge. Unlike fires, floods and storm damage, very few colleges are insured against financial losses due to a biological disaster.

A campuswide outbreak could be costly, and lost tuition revenue from a decrease in Chinese student enrollment could have lasting effects for which colleges are not insured. Typical college insurance plans pay out next to nothing for pandemic-related losses, and purchasing new policies amid the outbreak is difficult and incredibly expensive.

Most colleges have property and business contingency insurance plans. Both could provide some relief for affected colleges in the right circumstances.

Some property insurance plans contain sublimits -- caps on payouts for a specific type of loss -- for outbreaks and pandemics. As long as the college meets its deductible, it could file a claim for pandemic-related damages and be reimbursed up to the policy’s sublimit. A typical $500 million property insurance plan could include a $1 million pandemic damages sublimit, according to Bret Murray, who leads higher education strategy at Risks Strategies Company, a national insurance brokerage and risk management firm.

But getting claims approved could be tricky because colleges must demonstrate actual physical damage to campus property to receive any compensation.

"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 insurance plans protect against interruptions with contractors providing services, such as dining and janitorial services. If a campus outbreak somehow interrupted covered contracts, colleges could file an insurance claim as long as their plan included pandemic-related disruptions.

The University of Colorado at Boulder, for example, maintains property and business interruption insurance. Because of limited coverage in the case of a pandemic, the university cannot well predict what financial losses would be covered under its plans.

“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.”

Experts are looking ahead at what the coronavirus could mean for fall enrollments. International enrollments, particularly enrollments from China, have been a major point of concern. A decrease in tuition revenue as a result of the coronavirus outbreak wouldn’t be covered by property or business contingency insurance plans.​

A survey of more than 230 colleges by the Institute of International Education found that 76 percent of institutions reported that recruiting events in China had been affected by the coronavirus outbreak. Recruiting events include "tests like IELTS and TOEFL, recruitment events like college fairs, and other engagements."

One university is uniquely protected against such revenue loss: the University of Illinois at Urbana-Champaign.

The university two years ago purchased insurance to protect against revenue loss due to a drop in Chinese student enrollment. The insurance, created for the university’s business and engineering schools by a subsidiary of Lloyd’s of London, kicks in after the university files a claim that meets two requirements. First, it must demonstrate an 18.5 percent loss in tuition revenue brought in by Chinese students compared to the year prior. Second, the drop in enrollment must be attributed to one of a predetermined list of causes, one of which is a pandemic.

The plan pays out up to $60 million in the case that Chinese student enrollment drops to zero. The university pays $424,000 in annual premiums for the policy, and a university spokesperson said it's reviewing options to expand coverage in the future.

According to Murray, other colleges have eyed the plan in light of the coronavirus outbreak. Beloit College's spokesperson said the college has not ruled out purchasing coronavirus-impact insurance. ​

“A lot of institutions looked at that,” Murray said, “but it was very expensive, and a lot of schools felt it wasn’t worth the risk.”

For most colleges, it’s too late. Few insurers are going to underwrite a pandemic plan in the midst of an outbreak, Murray said.

“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.”

The coronavirus outbreak has already wreaked havoc on study abroad programs. Since the outbreak began, colleges have been canceling their spring study abroad programs and are considering cutting summer programs as well. Insurers are adding carve-outs to make it more difficult to file pandemic-related claims for lost travel expenses that would typically be covered under existing policies.

The IIE survey found that 48 percent of respondents had scheduled spring study abroad programs in China, and 94 percent of those institutions postponed or canceled the programs, with 76 percent “canceled outright or postponed indefinitely.”

Melissa Torres, president and CEO of the Forum for Education Abroad, outlined many ways colleges are losing money on canceled programs -- from logistical losses like airfare, hotels and excursion costs, to wasted operational expenses like international faculty contracts and maintaining empty campuses abroad.

“Everybody is being affected,” Torres said. “Institutions that have really large education abroad programs, full-semester programs, are going to be really hard 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.

Many colleges work with third-party providers for study abroad programs, and they are facing huge potential losses as a result of the outbreak. Torres is concerned for their future.

“There are literally hundreds of education abroad providers and programs,” she said. “If the smaller and medium-sized providers go out of business because of the cancellations or requests for refunds,” the resulting consolidation could lead to higher prices across the board.

As summer programs approach, Bill Frederick, founder of Lodestone Safety International, had one piece of advice for colleges weighing their study abroad options: “Don’t spend money that you’re not going to get reimbursed if you’re not sure which way this is going to go.”

While recovering sunk costs from campus outbreaks and canceled programs could be tricky, there are steps colleges can take to temper the coronavirus’s 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 council and leadership.

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

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