California urges insurers to cover foster family associations amid coverage crisis

The California Department of Insurance is urging private insurance carriers to provide more coverage for foster family associations (FFAs), nonprofit organizations that recruit, certify, and train foster parents and support foster families.

The push comes as FFAs in the state face a potential loss of coverage due to rising claims and shifting risk appetites among insurers.

According to a notice from the Department of Insurance, FFAs have been impacted by increased court settlements, which have contributed to the current market challenges.

The Nonprofits Insurance Alliance of California, Inc (NIAC) currently provides approximately 90% of coverage for FFAs in the state, through the only nonprofit pooled risk arrangement available. In August, NIAC announced that it would be issuing nonrenewal notices for all FFAs in California.

Pamela Davis, founder, president, and CEO of NIAC, explained that changes in the judicial system are the primary reason other carriers have left the market, leaving NIAC as the sole provider.

She noted that FFAs are often held responsible for the actions of individual foster parents, even when they comply with all state regulations during the certification process.

Davis also emphasized that while the FFA market remains insurable, it becomes uninsurable when FFAs are required to control what happens in private homes, despite following state guidelines. She questioned how insurers could accurately determine rates for random criminal acts when FFAs are held accountable for behavior they cannot predict.

Davis also highlighted the differences between FFAs and other care models, such as group homes or schools, where oversight is continuous. In addition, she pointed out that time-limited demands from plaintiffs’ attorneys place significant strain on NIAC’s resources and often do not allow enough time to verify claims. In one instance, she said NIAC was preparing to settle for the policy limit, only to discover the plaintiff had no standing.

A recent legislative effort sought to address these issues. At one point, NIAC supported the bill, but lawmakers made significant changes, removing three out of four provisions that NIAC had backed.

The remaining provision, which NIAC still supports, would prevent counties from shifting liability onto FFAs. Davis said that in some cases, NIAC had to pay claims against FFAs even when the county was solely at fault.

The removed provisions included measures addressing time-limited demands, requiring courts to consider previous case law, and establishing “substantial compliance” standards, which would have required plaintiffs to prove that an FFA’s actions, or failure to act, were a substantial cause of the harm.

While Davis stated that NIAC’s solvency is not in question, the organization must prioritize the other nonprofits it serves. NIAC provides coverage to more than 12,000 organizations, including Boys and Girls Clubs, homeless shelters, senior centers, and immigration organizations, in addition to FFAs.

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