Professional Liability Coverage for Human ServicesSeveral social and legislative issues have complicated the insurance landscape for foster care agencies and other human service organizations that work with children and vulnerable populations. As insurance carriers take steps to avoid risks – and sometimes pull out of entire markets – obtaining adequate professional liability coverage is becoming more difficult and more expensive.
The Foster Agency Crisis
New legislation is at the heart of many of the current issues facing the human services sector.
California AB 2496 (also called the Foster Family Agency Accountability Act) was signed into law on September 22, 2024. According to the NIAC, the bill was supposed to help the state avoid a shutdown of foster care agencies by ensuring these agencies would not be liable for unforeseeable harms, among other provisions. However, the revised version that was signed into law did not do enough to shield foster agencies from litigation.
A recent lawsuit shows how expensive litigation can be. According to The Press Democrat, a jury awarded nearly $25 million to three foster children who were sexually abused. The jury found that the foster agency was responsible for more than half of the $25 million verdict for failing to vet the foster parent properly or perform sufficient inspections. The foster agency denies negligence, arguing that the man had fostered children with his wife in the past and had no known history of abuse.
Statute of Limitations Reform
Human services organizations also face increased exposure to expensive lawsuits due to recent changes in the statutes of limitations for sexual abuse against children.
Many states have increased or paused the statutes of limitations in such cases. According to Child USA, new laws or resolutions went into effect in 11 states and one territory in 2024. As of 2024, 19 states and two territories have no civil statute of limitations and 30 states and three territories have revived statutes of limitations that had expired.
On the federal level, the Eliminating Limits to Justice for Child Sex Abuse Victims Act of 2022 eliminated the statute of limitations for civil lawsuits brought by people who suffered sexual abuse as children in violation of certain federal laws.
Other Factors Impacting Insurance Coverage
In addition to recent legislative challenges, human services organizations face increased pressure due to evolving social awareness and demand for services.
Recent years have seen several prominent social movements, including #MeToo and DEI. While these movements have aimed to bring justice, equity, and accountability to those who need it, they have also brought increased scrutiny and litigation exposures.
At the same time, the human services sector has experienced an increased demand for services. The 2024 Annual Homelessness Assessment Report from the U.S. Department of Housing and Urban Development shows that homelessness reached record levels in 2024. Among families with children, there was a 39% increase in homelessness in 2023.
The California Market
While human service organizations throughout the nation face a difficult insurance market, the situation in California is particularly dire.
In 2024, the Nonprofits Insurance Alliance of California announced that it would no longer provide coverage for foster care agencies in the state, citing cost-prohibitive litigation. According to the North Bay Business Journal, the insurer covered 90% of the foster care agencies operating in California.
The Nonprofits Insurance Alliance of California (NIAC) says it had dominated the market because most other insurers had already exited or were in the process of exiting. Now that NIAC is also exiting the market, many agencies could be left without coverage.
What Can Human Services Organizations Do?
Human services organizations should be prepared for a challenging renewal, especially if they have molestation exposures. Experiencing nothing more than a rate increase may be the best-case scenario for this sector. Many organizations may have a harder time finding any coverage due to decreased market capacity.
However, it’s not time to throw in the towel. There are a couple things organizations can do:
- Work with Heffernan Insurance Brokers – a committed partner who is familiar with the human services organization and has access to a wide range of insurance solutions designed for this sector.
- Consider creative insurance strategies. For example, if you can’t secure the coverage you need in the traditional insurance market, collaborate with your broker to explore other options such as non-admitted coverage or captive programs.
Heffernan Insurance Brokers has coverage solutions designed for nonprofit organizations, including those in the human services sector. We’ll help you find the coverage you need, including professional liability and sexual abuse and molestation coverage. Learn more.
