Foster care and adoption organizations are running into more barriers as they try to find affordable liability insurance. Costs are skyrocketing and fewer carriers are offering coverage. It’s putting a serious financial strain on foster care organizations that already work on razor-thin margins.
Let’s look at the current situation, what’s leading to the most claims, and what the future may hold.
Q: What’s driving the increased cost of liability insurance coverage for foster care organizations?
Liability insurance costs are being driven, in part, by state governments and court cases. Many states are lengthening the statutes of limitations on these claims, and monetary awards from lawsuits are trending higher and higher. This has priced many carriers completely out of the market.
Q: Are any standard insurance carriers still offering coverage?
A few regional carriers are offering some coverage. But most markets are pulling back on capacity on both the primary and excess layers for organizations with foster care/adoption operations. Your broker relationship will become increasingly more important as insurance carriers become selective in deciding which companies to cover.
Q: What is driving the increase in claims? And what can foster care organizations do to protect themselves?
Through our discussions with nonprofit insurance providers, we have found the following areas to be the biggest underlying reasons for additional claims. If you can relate to these, we strongly advise you to address them so you can continue providing protection for those entrusted to your care and avoid claims.
- Improper staffing levels, where staff caseloads are too high
- Inability to monitor foster placements with enough frequency/involvement
- Improper training or lack of awareness for employees; this includes failure to report what they see
- Not vetting foster families
- Taking on foster children who are beyond the capabilities of the organization (i.e., medically fragile, emotionally unstable, etc.) where foster kids are being placed in homes and biological children are the claimants.
Q. What does the future hold?
Insurance offers for foster care/adoption agencies will continue to be limited unless there is a major change in how juries award verdicts and how states approach their statues of limitations and look-back windows. It could potentially get worse as more states look to move their overloaded caseloads to social service entities that only want to help the population. Many are already overwhelmed.
Q. What can be done to calm the trend of increasing costs for liability insurance coverage for foster care agencies?
While children and families who have been harmed deserve justice, if insurance solutions can’t be found, these important services will no longer be feasible; children who need them will suffer further. The best hope for decreasing this trend is to lobby governments – both state and federal – to look again at the statutes of limitations and look-back periods. Statutory caps also should be considered, because jury decisions are becoming much more punitive.
Q. Outside of accepting larger deductibles and working to control claims, how can organizations help control their costs?
Make sure you understand the risk you’re assuming when taking on contracts. State contracts can be one-sided, and they often can lead to trouble down the road in proactively responding to the needs of the kids. This is because contracts are often open-ended in their needs.
For example, consider a situation where your agency agrees to take some form of “grant” to handle 50 foster care children. Are you looking at who or what type of placements these are? Are you ensuring you have the staffing to handle these kids? Have you fully vetted the foster parents before taking on the contract?
Also consider the long-term exposure you’re assuming when looking at adding a function that’s only a small part of your operation. Unfortunately, it only takes one claim to potentially bankrupt the organization or severely tarnish its reputation. The actions of a rogue employee or a lapse caused by a temporary staffing shortage can have devastating effects.
Q. How can our choice of broker make a difference?
The number of insurance providers that offer terms for foster care and community services organizations is small, and the broker you select in this space is highly crucial. The right broker will find the best and right terms to satisfy your contractual requirements and properly cover your enterprise in the event of a loss or claim.
It’s imperative your insurance underwriters understand the risk they’re reviewing. By picking a broker with strong experience in this niche, such as The Miller Group, you will have a partner who can best explain your operations and assist you in improving your overall risk.
As capacity continues to shrink for foster care and community service coverage, carriers will save capacity not only for the best risks but also for their best broker partners with whom they have already developed a relationship.
By Pat Murphy, Chief Revenue Officer, The Miller Group