Altering the properties of coverage: with B.I. coverage triggered only with a property loss, institutions find a way to protect themselves even when no property is at stake.

Chicago is the biggest small town in the country, a place where people can rely on their neighbors. And so it was when the Educational & Institutional Insurance Administration, an association of 233 Protestant colleges and universities, needed coverage in ease one of its member institutions had to close because of violence or an outbreak of illness.

No such coverage existed in the market; business-interruption insurance is triggered by a property loss and would not apply if students and faculty had to stay off campus.

After a search by EIIA, the Hays Cos. brokerage came calling after EIIA's property business and were offered the challenge of pandemic coverage. Hays is based just a few blocks from EIIA in the heart of downtown.

"First, we came up with a general outline of terms and took that to the market, along with some prices," said Kerr. "It was such a large potential loss that most underwriters had shied away from this type of coverage in the past, but we put the client's specifications into a document that made it easy for carriers to size up loss versus probability."

Berkshire Hathaway agreed to write the coverage with an unusual three-and-a-half-year term to spread the premium over a manageable period for the insureds, which are the 128 members of EIIA.

"Carl Hahn, our senior vice president wrote the policy, and Jim Finch worked directly with the underwriters to get agreement on triggers and prices," said Hays account executive Georgia Olsen. "But the major factor was input from the client."

Mary Ellen Moriarty, vice president of property and casualty at EIIA, said her advisory council came up with the idea after one member institution, Ferrum University in Ferrum, Va., was approached by its municipality about being a possible quarantine site for the avian flu in 2005. "Bobby Thompson, the risk manager at Ferrum, called me to ask if his business-interruption insurance would cover him," said Moriarty.

"I checked and told him no, but to ask if the city would indemnify him," she continued. "He checked, and they said no. So we took the problem to our advisory council. Soon after that, the shooting took place at Virginia Tech, and we realized that there were many hazards that could shut us down without a property loss. It could be a global pandemic, or a campus incident, violence, contamination or food-borne illness."

Not long after the policy came into effect, it was almost triggered by the H1N1 flu. "We had a bit of a test run with the swine flu," said Moriarty. "That really caused us to think about the threats. With a World Health Organization rating of 5, there were very strict protocols for us to collect on the policy. But once WHO went to Level 6 for the H1N1, all the hoops are gone. If the virus comes back this fall and we pray that it won't--we would still have to prove a financial loss, but otherwise are free and clear." Many carriers exclude swine flu, so similar coverage would not be available elsewhere, she noted.

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"The potential loss for the colleges and universities is if they would have to cancel classes or even just some programs and return tuition money or fees," said Olsen. "We could not get anyone to write this coverage for us, so we had to find another way to get our clients protected."

Coverage triggers vary depending on the type of hazard but generally are built around a percentage of students and faculty who must stay away from campus for several days.

The policy was crafted for colleges and universities, but it could be applicable to other public and private institutions, pools and associations, she said. Siri Gadbois, president of EIIA, recommended that participating institutions purchase the coverage, she added.

In negotiations with Berkshire he developed the concept of front-loading premium to allow for an institution's budgets to catch up to the premium costs.