New York is facing a growing insurance crisis that is putting a strain on foster care agencies across the state. Lawmakers recently introduced a bill aiming to create an assigned-risk insurance market and a $20 million fund to help voluntary foster care agencies deal with rising costs. This move comes as the sector struggles with lawsuits tied to the Child Victims Act, which has left many agencies without proper coverage.
Senate Bill 9113 would require all insurance companies offering commercial risk policies in New York to take part in this assigned-risk program. This program would help foster care agencies get insurance even if regular carriers refuse to cover them. The coverage would include both professional liability and claims related to sexual abuse and molestation.
The pressure on agencies is intense. A recent survey showed private foster care groups in New York are facing nearly 800 lawsuits under the Child Victims Act. Almost 40% of those cases involve situations where the insurance policy that existed at the time of the claim has been voided. As a result, agencies are left to cover large settlement costs themselves. Kathleen Brady-Stepien, the director of the Council of Family and Child Caring Agencies, warned that the financial damage could be devastating.
Insurance premiums are soaring, and agencies are struggling to keep up. Across the country, some groups report premium hikes between 30% and 400%. For example, one agency in California saw its insurance jump from $300,000 to $1 million in just a year. In Connecticut, similar stories are unfolding: The Village for Families and Children saw insurance costs nearly triple between 2021 and now, while New Britain’s Klingberg Family Centers faced premiums rising eight times higher. The latter even had to reduce its umbrella policy coverage from $10 million to $2 million due to cost pressures.
According to Steven Girelli, CEO of Klingberg, this rapid increase in insurance costs is unsustainable for foster care providers. Damien Zillas of Nonprofits Insurance Alliance pointed out that the problem isn’t more claims but bigger claim values. A recent jury in Sonoma County awarded $25 million to three siblings who sued over abuse by a foster parent.
This isn’t just a New York problem. Foster care agencies in states like California and Pennsylvania are also feeling the crunch. Since notices about policy non-renewals started circulating last year, at least 19 foster family agencies have shut down in California. More than half of foster care providers in Pennsylvania say they lack affordable liability insurance. Experts blame recent laws in states like New York and California that removed time limits on abuse claims. This means insurance companies may have to cover incidents from decades ago, increasing their risk.
The proposed bill also plans to have the state’s Office of Children and Family Services adjust payments to foster care agencies so they better match rising insurance costs. Meanwhile, Washington’s Insurance Commissioner Patty Kuderer, after releasing a report, suggested that a joint underwriting association might not be a solution and called for possible federal involvement.
With so many agencies facing lawsuits and skyrocketing insurance bills, the future of foster care agencies appears uncertain without support and new solutions to manage this ongoing insurance crisis.