If Ball State University loses the lawsuit filed by Michael McKinney's family, the university has liability insurance that will pay up to $16 million, the head of University Communications said.
Heather Shupp, executive director of University Communications, said that if the McKinney family is awarded more than $16 million, she is not sure how the university and the state would handle the situation.
"It's unclear as to what would happen," she said. "Most of our funding comes from the state."
Shupp said it is difficult to know what financial situation Ball State will be in when the lawsuit is settled.
"That would be years from now," Shupp said. "We're talking years in the future and our future budget."
To cover up to $16 million, the university has two liability policies.
The university has a primary general liability insurance policy that protects university employees, including university police, during lawsuits, Shupp said.
Stephen Avila, associate professor of insurance, said general liability insurance usually protects the university from minor damages, such as when someone slips on the ice.
"There would be a limit to the insurance coverage," Avila said. "This is determined when buying the insurance. Also, the language depends whether it covers the defense costs."
The primary policy will pay up to $1 million for a single incident, such as the lawsuit filed by the McKinney family on Wednesday, Shupp said.
If Ball State loses the lawsuit and the amount awarded to the McKinney family is more than the primary policy covers, the university's excess liability insurance would provide additional coverage, Shupp said.
The excess liability policy will cover up to $15 million, Shupp said.
John Fitzgerald, professor of finance and insurance, said that excess liability policies provide large institutions with additional protection.
"If sued, institutions could have an excess liability or commercial umbrella policy," Fitzgerald said. "That policy would pay after the first policy has been exhausted up to a certain amount."
The university will still have liability insurance even if it loses the lawsuit, Shupp said.
To pay for the two liability policies, each year Ball State pays a premium to United Educators Reciprocal Risk Retention Group from the university's operating expenses, Shupp said.
Last year, the university paid $147,795 for the primary general liability insurance and $191,385 for the excess liability insurance.
Fitzgerald said that rates are set by the insurance company and are based on exposures or possible risks.
Avila said if the risks are too many, the insurance company may not renew the contract.
Shupp said the university doesn't think its insurance provider would drop its coverage because of the lawsuit.
"I can't imagine an insurance provider looking at Ball State and seeing us as a high risk," Shupp said. "The risks we have are no different than before. We're talking about something that in no way can we imagine happening again."
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