Religious Institutions Update: December 2015

Nathan A. Adams IV is a Partner in our Tallahassee office.

Timely Topics

Captive insurance companies can be a win-win for organizations with excellent claim records that would rather accrue their insurance premiums than pay them to a third-party insurer. Put simply, captive insurers are insurance companies formed by the insured with the specific objective of insuring risks emanating from the parent company or group of companies. The advantages can be substantial: For example, after "endowing" the captive insurer, the parent no longer has to make annual premium payments unless the captive has an unexpected payout period or takes on additional risks. Like ordinary insurers, captive insurers must convince regulators that their business is sound from an actuarial and financial perspective. Typically, captive insurance companies hire outside specialists to assist with this. They retain the underwriting profit and investment income, preserve control over how the company pays losses and settles claims, can develop their own forms and rates based on group experience, and, where necessary, may seek reinsurance to protect against remote risks. Captive insurers can tailor their products to the exact risks and strengths of your organization, whereas commercial insurers lump your risks into the risk profiles of other organizations that may prove quite different. By retaining control over settling claims, captives wrest control from third parties over these claims and are able to benefit directly from enhanced loss prevention programs. Not all types of insurance can be insured through captives, not all states authorize captives for every type of organization and not all risk profiles or organization sizes make sense for captives. Smaller organizations may want to join together in associations to benefit from them. Captives also require experienced and sophisticated management from at least outside vendors. But when the elements for captive insurance are satisfied, it is an excellent way to benefit from good risk-compliance programs and to steward resources. Holland & Knight is glad to assist if you would like more information about captive insurance companies.

Department of Justice May Not Enjoin School Voucher Program Based on Federal Desegregation Order

In Brumfield v. La. State Bd. of Educ., No. 14-31010, 2015 WL 6989319 (5th Cir. Nov. 10, 2015), the court ruled that the district court was without subject matter jurisdiction to modify a federal desegregation order to gain oversight and some level of control over Louisiana's Student Scholarships for Educational Excellence Act (Act). The federal order, put in place in 1975 because of Louisiana's historical practice of subsidizing racially discriminatory private schools, was converted into a consent decree in 1985, incorporating a process for private schools to be certified as non-discriminatory to be eligible for state assistance. Under the court's continuing jurisdiction over the consent decree, the U.S. Department of Justice (DOJ) sought to compel discovery of information about the voucher program, then to alter the order to enjoin Louisiana from awarding any vouchers to students...