4000 - Advisory Opinions
Mutual Insurance Fund Coverage by Deposit Insurance
October 20, 1987
Patti C. Fox, Attorney
By letter of September 29th, you requested deposit insurance coverage information concerning an account owned by an association of state schools. The purpose of the association is to provide self insurance for worker's compensation claims for the member schools.
Based on the limited information in your letter, it would appear that the association administers a type of mutual insurance program on behalf of the schools. As participants in the association, the schools have pooled their funds to lessen their collective risk of loss on worker's compensation claims. The pooling of funds for a mutual benefit, i.e., spreading the risk of loss to all participants, does not result in separately administered insurance programs for each school. Therefore, no school has individual ownership over the use of its contributions. Section 330.6 of the FDIC's regulations would thus be applicable: the deposit accounts of an unincorporated association engaged in independent activity shall be insured to $100,000 in the aggregate. "Independent activity" is any activity other than one directed solely at increasing insurance coverage. 12 C.F.R. § 330.7.
Unless the insurance fund operates in a substantially different manner from the foregoing assumption, then the account held by the association will be insured to $100,000 in the aggregate. If, on the other hand, the association administers separate insurance plans for each member, the insurance coverage may vary.
You may wish to confirm the specifics of the program with the association and its legal counsel to satisfy yourself as to the insurance coverage.