CALIFORNIA
California Urging Private Carriers to Shore Up Market for Foster Family Associations
SACRAMENTO, Calif. //BestWire// - The California Department of Insurance is urging private market insurance carriers to write more coverage for foster family association, nonprofit organizations that help recruit, certify and train foster parents as well as support foster families.
FFAs in California are on the verge of losing coverage due to a trend of high court settlements, according to a notice from the California Department of Insurance. The regulator said that in addition to an increase in claims, this sector has also been hampered by changing risk appetites and other market conditions. As a result, the only nonprofit pooled risk arrangement currently available is through the Nonprofits Insurance Alliance of California Inc., which writes roughly 90% of the coverage for FFAs in the state.
NIAC said in an August statement it will be sending out nonrenewal notices for all California FFAs.
“What has changed is the judicial system, and this is why other carriers left,” said Pamela Davis, NIAC founder, president and chief executive officer. “We are really kind of the last one standing.”
One of the main issues, she explained, is FFAs are being held responsible for the action of an individual foster parent despite following all the regulations laid out by the state when certifying a home.
Davis stressed this market is insurable, as NIAC has been writing the business for 35 years. However, it becomes uninsurable when FFAs do everything the state asks, but are then mandated to go a step beyond and control what happens in a private home, she said.
“You can’t insure that. How do you determine rate and price for a random criminal act? If you hold the FFAs accountable for human behavior that they could not have anticipated, it then makes it uninsurable,” Davis said.
One of the most important facets to consider in this market, according to Davis, is FFAs are an entirely different model from group homes or schools where oversight can be performed around clock, every day of the year.
Further, she explained time-limited demands from plaintiffs’ attorneys tax the NIAC’s resources, and do not provide nearly enough time to verify the information or if the child was actually under the care of an FFA at the time of the incident.
In one instance, Davis said the NIAC was in the final stages of settling for the policy limit only to discover that the plaintiff had no standing.
“They (plaintiff’s lawyers) say ‘we’ll give you 10 days or 15 days to pay the policy limits or we’re going to take you to trial,’” she said, adding once at trial, policy limits become “open.”
State lawmakers attempted to address the issue with a bill that was at one time supported by NIAC. However, legislators made major changes to the bill by removing three of four of provisions NIAC strongly supported.
The provision that remained and is supported by NIAC, would prevent counties from shifting liability onto FFAs. Davis said in cases where the country was solely at fault, NIAC was still having to pay the claim filed against FFAs.
The bill also had provisions addressing time-limited demands, how courts should consider previous case law in this area and “substantial compliance,” which would have required a plaintiff prove an FFA’s actions, or failure to act, was a substantial cause of the harm.
Davis said while the association’s solvency remains unquestionable, it has to do right by the other nonprofits it works with. In addition to the FFAs, NIAC provides coverage to more than 12,000 organizations ranging from Boys and Girls Clubs and homeless shelters to senior centers and immigration organizations.
“I know a lot of their (FFA) executive directors and they're hardworking people. They do a fabulous job. This is the last thing we wanted to have happen,” Davis said. “If we could have gotten these procedural changes into the law, we would have continued uninterrupted coverage.”
Attempts to gain further comment from the California Department of Insurance was unsuccessful.
Nonprofits Insurance Alliance of California, Inc. has a current Best's Financial Strength Rating of A (Excellent).
(By Steve Hallo, senior associate editor, BestWire: Steve.Hallo@ambest.com)