NIA to halt key insurance coverage for foster family agencies in California

NIA to halt key insurance coverage for foster family agencies in California | Insurance Business America

Non-Profits & Charities

NIA to halt key insurance coverage for foster family agencies in California

It will stop renewing D&O and other coverage following new state legislation

Non-Profits & Charities

By
Kenneth Araullo

Nonprofits Insurance Alliance of California Inc (NIA), a nonprofit insurer that specializes in coverage for nonprofit organizations, is discontinuing the renewal of certain coverages for foster family agencies (FFAs) in California.

The affected coverages include directors and officers (D&O) liability, social services professional liability, and improper sexual conduct and physical abuse liability.

FFAs, which recruit, train, and certify foster parents while providing support to foster families, rely heavily on NIA for insurance coverage. As per AM Best, NIA writes approximately 90% of the insurance for FFAs in the state.

The carrier will also stop accepting additional exposures for California FFAs under existing policies. However, NIA will continue to provide commercial automobile, commercial general liability, and property coverage for California FFAs without interruption, according to a company statement.

The decision follows the signing of Assembly Bill 2496 by California Governor Gavin Newsom on Sept. 22. The law alters the process for transferring resource home approval to counties or other FFAs, implementing a less stringent approval process than previous methods.

Pamela Davis (pictured above), NIA’s founder, president, and CEO explained the impact of the new legislation.

“We anticipate there is going to be some really hasty movement from one FFA to another that still might have insurance coverage,” Davis said. “They are allowed to make these movements of these foster family agencies without the rigorous vetting process that has been required in the past.”

Davis expressed concerns that this less rigorous process could be exploited by plaintiff’s attorneys to claim that abuse or injuries occurred because of a weaker vetting system.

The new law also stipulates that FFAs can be held liable for injury or damage caused by the agency’s negligence, but not for damages or injuries caused by public entities. Additionally, AB 2496 requires FFAs and public entities to cover their own costs for insuring against their actions and defending against claims arising from those risks.

Davis indicated that the new legislation fails to address key market challenges, which have been affected by large jury awards. “In our view, this bill did nothing to address the problem,” she said.

Although the nonrenewal decision was difficult, Davis said it was necessary to protect NIA’s broader portfolio of 12,000 policyholders, which includes a variety of nonprofit organizations, such as Boys and Girls Clubs, homeless shelters, senior centers, and immigration organizations.

What are your thoughts on this story? Please feel free to share your comments below.