Goals of this FAQ
- Provide factual answers in the simplest, jargon-free language possible.
- Provide sourced information wherever possible.
FAQ: For Journalists That Want to Avoid Reporting Errors
What is the most important thing for journalists to understand when covering this story?
Bias can be introduced without an understanding of the motivation of nonprofit organizations (such as NIAC and FFAs).
We live in a for-profit world. It’s difficult and foreign for many people to understand the motivation of nonprofits, but here’s some things to keep in mind:
- Nonprofits are not focused on profit. Nonprofits are focused on benefit to community.
- Nonprofits do not have shareholders. Nonprofits have stakeholders.
All of these things tend to run opposite to what most have been taught or have grown up learning. When bias stemming from a for-profit understanding of the world bleeds into reporting, it does not make good journalism or help nonprofits in their missions to benefit community.
What mistakes have journalists made when covering this story?
There’s two mistakes that have been made.
First, errors in reporting have shown up since this is (admittedly) complicated subject matter:
- As mentioned previously, it’s hard for many people to understand the motivation of nonprofits being benefit to community, not profit.
- It’s even more difficult for most people to understand insurance. It can be complicated, and most people don’t exactly find it exciting.
- A nonprofit insurer of other nonprofits (like NIAC) is a true outlier, and an even more complicated thing to understand. At this point, most people’s eyes are completely glassed over.
NIAC encourages members of the media to make a media/press inquiry when they are not sure about how something works, rather than report on how it does not work. NIAC is very accommodating with these requests.
Second, mistakes have been made by journalists that failed to perform their own due diligence, promoting misinformation under the commendable intention of providing a fair and balanced story.
When given an argument that runs against NIAC’s claims, some journalists have not bothered to come to NIAC for a counterargument. This is a shame, as in many cases, NIAC has sourced facts ready to share that refute many of the most common arguments.
NIAC encourages journalists to provide NIAC with the opportunity to rebut misinformation.
What does NIAC offer journalists covering this story?
NIAC encourages members of the media to make a media/press inquiry. NIAC is available to answer questions, provide interviews, and provide arguments/counterarguments as necessary.
Insurance and nonprofit insurance can be complicated, and NIAC will make a best effort to make it as simple as possible for everyone, without sacrificing detail or critical nuance.
FAQ: FFA Basics
What does “FFA” mean?
Foster Family Agency.
What do FFAs do?
In California, FFAs are nonprofit organizations licensed by the Community Care Licensing Division of the California State Department of Social Services to engage in the recruiting, certifying, training, and providing professional support to, resource parent(s); or in finding homes for placement of children for temporary or permanent care who require that level of care as an alternative to a group home.
What’s the difference between a “foster home” and a “resource home”?
What’s the difference between a “foster family” and a “resource family”?
What’s the difference between a “foster parent” and a “resource parent”?
For the phrases above, the use of “foster” has become antiquated. The state of California adopted the phrases using “resource” in January of 2017. In this document, the phase “foster parent” is used for ease of understanding. However, the terms above can be used interchangeably.
Notably, the phrase “foster family agency” is still commonly used.
FAQ: FFAs, the Uninsurable Problem, and NIAC
Are California FFAs required to carry insurance?
Yes. In their contracts with California counties, California FFAs are required to carry insurance.
NIAC is a specialty nonprofit organization that is a 501(c)(3) nonprofit itself, in a sea of large, monolithic commercial insurance carriers. It’s important to ask how NIAC came to insure 90% of the California FFA market.
Starting in 2019, major commercial insurers like Philadelphia, AmTrust, Nationwide, Great American, Hanover, Berkley Human Services, and more, nonrenewed coverage for foster family agencies in California.
After receiving nonrenewal letters from these major insurers, California FFAs went shopping for an insurer that would provide them with the coverage that they are required to have in their contracts with California counties. In most cases, only one insurer was willing to provide them with this insurance: Nonprofits Insurance Alliance of California (NIAC).
It’s worth noting that NIAC never specifically wanted or set out to obtain a 90% market share for California FFAs. In fact, it’s much healthier and preferred for California FFAs to have more options with their insurance. NIAC only achieved the 90% market share because virtually all the other carriers refused to insure California FFAs.
This number was based on the 8,960 children presently in resource homes (see page 37 of the Caseload Packet in the Local Assistance Estimates for the 2024-2025 governor’s budget) relative to the approximately 7,900 resource homes overseen by the California FFAs that NIAC insures.
Why did the major commercial carriers nonrenew the FFAs?
By definition, a commercial company’s motivation is profit.
When a commercial insurer realizes they have a class of business that is either unprofitable or not profitable enough, and they determine that they cannot charge adequate premium to cover the anticipated risk, they tend to nonrenew all the insureds and drop the entire book of business.
When commercial insurers nonrenewed California FFAs in 2019, it was largely due to these insurers realizing that California FFAs are uninsurable, for the four reasons discussed in the next FAQ item.
Why did NIAC nonrenew the FFAs?
What was NIAC’s motivation for nonrenewing the FFAs?
What does it mean when NIAC says FFAs are “uninsurable”?
What are the four specific problems in California judicial processes whereby California FFAs are being scapegoated?
NIAC identified four problems in California’s judicial system that make California FFAs “uninsurable” by any insurer:
- FFAs are held responsible for the unforeseeable criminal acts of others. FFAs can be held liable for harm that comes to children in foster homes when nothing in the due diligence process indicated/suggested harm would come to the child.
- FFAs that substantially meet their responsibilities under state licensing laws are often held accountable to a different standard by the courts. FFAs can be held liable for harm that comes to children in foster homes when the FFA did nothing wrong in the due diligence process that the state requires.
- FFAs are held responsible for the negligence of counties. If a county doesn’t disclose full information about a child with a problematic history to the FFA, and that child commits harm at the foster home to another child, the FFA is held fully liable, whereas the county enjoys immunity for the omission. (This has been temporarily fixed with the version of AB 2496 that passed, which renders indemnity-shifting provisions in these contracts unenforceable.)
- Plaintiff attorneys are making huge, time-limited, monetary demands against FFAs and the insurers that protect them, before sufficient facts are available to evaluate these claims. These demands are typically 15-30 days, and that is not enough time to get all the records on the case (including medical records) necessary to evaluate the claim and see if the claim is genuine or if the FFA did anything wrong. If the case is not settled within this time, the plaintiff attorney can take the case to court and the insurer’s policy limits are lifted — meaning that a jury can award any amount they want, well beyond the insurer’s policy limits.
Rather than nonrenewing the California FFAs and quietly leaving the market like the commercial carriers did in 2019, NIAC made an effort to correct these four specific problems in California’s judicial system by sponsoring the original version of a bill called AB 2496, The Foster Family Agency Accountability Act.
NIAC’s bill was pork-free: Nothing was included in the original language of AB 2496 that would have benefited NIAC beyond fixes to the problems above. Also, it would have in no way limited the liability for any California FFA whose negligence and wrongdoing caused harm to a child.
NIAC required all four provisions in the original language of the bill to be satisfied in order to keep insuring California FFAs. Elected officials gutted all but one of them.
As a nonprofit, NIAC’s motivation is not profit for any individual. Any profit accrued by NIAC is either kept to support the risk undertaken by the coverage it issues to nonprofits, or is given back to the nonprofits themselves. In prior years, NIAC was able to return more than $50 million to nonprofits with claims experience that was much more favorable than their peers.
However, as a nonprofit risk pool, it became clear that both nuclear jury awards and large, confidential settlements in cases involving California FFAs that hadn’t done anything wrong to cause harm to a child presented an unfair burden to the community of approximately 12,000 other types of 501(c)(3) nonprofits that comprise the membership of NIAC’s insurance risk pool.
As a nonprofit, NIAC’s motivation is community, and this limited California FFA issue was negatively affecting the entire pool with the potential to increase the premiums of all members and jeopardize reinsurance arrangements.
One of NIAC’s founding principles is fairness in pricing. NIAC simply could not place the burden from less than 150 FFA members in California onto the rest, whose claims experiences were favorable.
Has NIA been seeing these four issues in other states? Do they have differing statutes?
There are certainly other states where it is challenging for FFAs to get fair hearings. Every state has its own law, so the answer is very dependent on each state’s law.
That said, NIA is seeing similar issues in other states, to varying degrees. In California, the issues became significant enough that NIAC needed to take action.
Is NIAC “just another greedy insurance company”?
NIAC itself is a mission-driven/community-driven charitable nonprofit, not a commercial carrier with profit motivation.
NIAC recognizes the important work that California FFAs do, and it is NIAC’s mission to support them.
NIAC has insured California FFAs for over 30 years. And, in 2019, NIAC provided coverage to the California FFAs that the major commercial carriers dropped.
Unlike the commercial carriers that did nothing to try and help these FFAs before nonrenewing them, NIAC sponsored the original AB 2496 legislation when it became clear that loopholes in the California judicial system were scapegoating California FFAs for harm caused to children at foster homes in cases where the FFA did nothing wrong and everything right.
NIAC’s team, led by NIAC Founder, President, and CEO Pamela Davis, worked diligently for many months, with a lot of late nights and some employees postponing planned vacations, to make sure that NIAC did everything possible to see the original language of AB 2496 become law.
NIAC continues to provide as many coverages as possible to California FFAs, and has only nonrenewed select coverages.
Why doesn’t NIAC stand by the FFAs and keep providing all insurances to them?
As a nonprofit, NIAC’s motivation is not profit. However, as a nonprofit risk pool, it became clear that both nuclear jury awards and large, confidential settlements in cases involving California FFAs that didn’t do anything wrong presented an unfair burden to the community of approximately 12,000 other types of 501(c)(3) nonprofits that comprise the membership of NIAC’s insurance risk pool.
As a nonprofit, NIAC’s motivation is community. NIAC was not prepared to have the claims results of fewer than 150 FFA members in California have a negative impact on the premiums of all members, and jeopardize reinsurance arrangements.
NIAC could always raise premiums, but NIAC determined that it was impossible to use actuarial science to predict random criminal acts the FFAs could not have foreseen.
Furthermore, juries will happily award amounts far in excess of the policy limits to “teach the FFA a lesson” even in cases where the FFA did nothing wrong.
Insurance relies on the ability to predict frequency and severity. Neither of which is possible in this situation.
This has been a problem for a while. Did NIAC wait until “the eleventh hour” to attempt to pass AB 2496? Could NIAC have given FFAs more warning that a nonrenewal was coming?
After the Martinez verdict in December of 2023, NIAC took time to look into the problems with the California legal system that caused the major commercial carriers to leave. Once the scope and size of the problem was realized, NIAC reached out to the association representing most of the FFAs and urged them to pursue changes to the law.
In the spring of 2024, when NIAC realized they had been unsuccessful finding an author, NIAC hired the best lobbyist possible and fought to see AB 2496 passed as originally introduced.
NIAC was transparent since the beginning of its advocacy that, if AB 2496 was not passed in a form that allowed California FFAs to be insurable, NIAC would not be able to continue providing coverage to them.
If FFAs are liable for the actions of those they certify, why does the buck stop there — why aren’t organizations/entities/agencies that certify the FFAs themselves assigned any liability?
To simplify, part of the problem NIAC identified was that California counties were requiring (through contract) the FFAs to agree to defend and indemnify the counties, even for the wrongful acts and negligence of the counties. That is not an insurable risk.
The following scenario illustrates this problem: A county had in their care a child with a history of abusing other children. If the county’s case worker did not disclose that history of abuse to the FFA, and then the child harmed another child at the foster home, the county could turn to the FFA and its insurer for defense and indemnification, even though their own negligence was the cause of the harm. The blameless FFA and its insurer were left holding the bag.
Addressing this shifting of liability issue is the one original provision that remained intact in AB 2496 and is now law — but only until January 2027. This is a temporary fix rendering indemnity-shifting provisions in these contracts unenforceable.
NIAC has announced that it will cancel the coverage of any FFA that takes in a ported child from another agency. How does that work?
Existing law allows for the transfer of resource family approval from one resource family to another, in a way that ensures the safety of foster children. The version of AB 2496 that passed permits the state to waive (or relax) the existing laws regarding such transfers. This puts foster children at risk, which represents a material change in the risk of insuring foster family agencies.
Due to this material change, NIAC cannot insure California FFAs that take on this increased risk.
What is reinsurance, and how does reinsurance factor into NIAC’s decision to nonrenew select coverages for California FFAs?
Reinsurance is insurance for insurance companies. Just as people choose purchase insurance to help mitigate their risk exposure, insurance companies purchase reinsurance to help limit their exposure on large claims.
The concern, given communications with NIAC’s reinsurance broker, is that if NIAC continued to attempt to cover the uninsurable risk of California FFAs, it could jeopardize the entire reinsurance program NIAC has maintained successfully over 35 years.
Are FFAs uninsurable because of out-of-control, rampant abuse?
No.
NIAC has insured California FFAs for 35 years. NIAC’s lens for answering this is the number of claims received. NIAC has not seen a material increase in the number of claims related to FFAs over the past 35 years.
The reason California FFAs are uninsurable is because of how these FFAs are treated in the California judicial system. That was the reason for NIAC’s advocacy with the original language of AB 2496.
Since government is paying FFAs anyway, why don’t California counties just take over the existing FFAs themselves?
After the passage of the modified version of AB 2496, this seems to be the plan.
However, it’s worth noting many counties appear to be wholly unprepared to take on these extra responsibilities, given there are multiple reports of unsupervised children being put up in hotels, office space, warehouses, and detention facilities in the LA Times, the Sacramento Bee, the San Jose Mercury News, Mother Jones, KCRA 3, and more.
Will NIA start nonrenewing FFAs (or their equivalents) in other states?
NIA has not announced any class-based nonrenewal in any other state other than California.
If NIA determines that any class of business represents an uninsurable risk in other states, a statement will be made at that time.
FAQ: The Original Language of AB 2496
Did AB 2496 attempt to walk back the statute of limitations governing allegations of sexual assault of a minor?
No.
In California, the statute of limitations for cases arising from childhood sexual assault has been modified twice over the past five years through AB 218 and AB 452. Both modifications have relaxed the statute of limitations, allowing plaintiffs to bring older claims.
The original language of AB 2496 that NIAC authored did not weigh in on the statute of limitations. It tried to fix some of the processes that unfairly restrict an FFA from fully defending itself.
NIAC believes that cases alleging sexual misconduct should be fairly adjudicated in court. In the original language of AB 2496, NIAC did not seek to prevent these cases by arguing for a return to the earlier, stricter, statute of limitations. AB 2496 was intended to ensure that all parties have access to a fair judicial process.
Would the original provisions of AB 2496 have insulated FFAs when harm came to children?
Absolutely nothing in the original language of AB 2496 made it harder to recover damages from the parties responsible for causing harm to children.
The bill was laser-focused on protecting FFAs in cases where they were not responsible for the harm caused.
Why did attorneys’ groups oppose AB 2496?
Follow the money. Attorneys in these cases can take 30-40% of the final jury award — which could mean tens of millions of dollars for them.
Certain plaintiff attorneys have specialized their practices to exploit the judicial loopholes surrounding California FFAs. Some of them even advertise on billboards and through TV commercials.
The original language of AB 2496 would have held those that did harm to children accountable. In cases where California FFAs did nothing wrong, attorneys would lose the ability to recover damages from innocent FFAs by going to sympathetic juries that will award money to children without regard to who was a fault. It has been NIAC’s experience that juries appear to try to determine who has the insurance resources and require them to compensate the victims, without regard to fault.
What are time-limited demands and lifted limits? If the jury award is higher than an FFA’s policy limit with NIAC, why is NIAC responsible for anything more than the policy limit?
A time-limited demand is a demand for settlement that must be accepted within a specified time frame and within the limits of applicable insurance.
The consequences for a defendant and its insurer not agreeing to a time-limited demand are that insurance policy limits can be lifted (lifted limits) in a court of law, should a jury award in the plaintiff’s favor. This, in essence, renders the insurer’s policy limits meaningless.
As an example, a plaintiff attorney can come to NIAC alleging harm came to child due to negligence by an FFA. They then make a demand for the policy limits, for example $5 million. The plaintiff attorney sets a time limit for a response from NIAC about whether it will pay those limits. The plaintiff attorney gives a short timeframe — typically 15-30 days, but sometimes as short as 10 days — to respond to that demand. If NIAC does not settle the claim before those 10 days are over, the claim can be taken to trial, and if the jury awards more that the policy (including interest since the time of the demand) the limits are lifted — the jury can award a judgement in any dollar amount they decide, well beyond the policy limits.
What’s the problem with time-limited demands when it comes to California FFAs?
In nearly all cases, it is not possible to conduct an investigation related to the claim within the time typically allotted in a time-limited demand, which is typically 15-30 days. For that reason, California passed California Code of Civil Procedure 999.5, which puts reasonable guardrails on time-limited demands. Unfortunately, this common-sense legislation does not apply to cases against California FFAs that involve allegations of child abuse.
One the many things necessary to investigate and evaluate claims like these are records from the county, which can include medical records, psychological records, and educational records. To get any of these records, it involves opening a case, filing a motion, waiting for the response to that motion, attending a hearing before a judge, and waiting for the judge’s decision ordering the release of such records. This process takes months.
Prosecuting attorneys know about this loophole and are taking advantage of it.
Is there “only one case” that shows this is a trend?
Ed Howard of the San Diego School of Law Children’s Advocacy Institute has maintained in numerous interviews that the Martinez case is a one-off. This is not true.
First, every major admitted commercial insurance carrier already left the California FFA market in 2019. If these carriers had reason to believe they could make money with this market, they wouldn’t have left. These carriers can’t make money from this line of business because of the problematic judicial processes that make California FFAs uninsurable.
Indeed, this market failure has been confirmed by California Insurance Commissioner Ricardo Lara, who indicated that “due to an increase in claims, changing risk appetites, and other market conditions, most insurers left or are leaving the insurance market that previously provided commercial liability insurance coverage for these FFAs.”
Second, while NIAC can’t comment on existing open claims cases or confidential settlements that have been made (regardless of fault), NIAC can state in no uncertain terms: The Martinez case is not isolated. Many extremely large confidential settlements are extorted from insurance companies, even when they believe the FFA was not at fault, because the risk of taking anything to a jury is far too great.
Did the original language of AB 2496 cap NIAC’s insurance liability?
The original text of AB 2496 did not have a cap.
The bill, as originally drafted, proposed modest changes to rules of civil procedure — none of which would cap damages at any amount.
When NIAC was drafting AB 2496, it was considered to ask the author to include this. However, NIAC’s goal was to present a modest proposal — rather than introduce something as polarizing as caps.
It’s not that caps aren’t unheard of. California has capped the amounts for medical malpractice for nearly 50 years.
Was the original language of AB 2496 an attempt for FFAs to escape accountability for abuse? Would the original language of AB 2496 have reduced tort liability for FFAs?
No. Lawsuits would have still been able to be brought against California FFAs for tortious acts of the FFA, its employees, volunteers, or contractors. AB 2496 in its original form would have focused the court’s attention on the acts of the particular FFA, as opposed to a general class.
Would the original language of AB 2496 have given FFAs near-complete immunity from abuse lawsuits?
No. This was never the intent. During advocacy efforts, NIAC asked the primary opponents of the bill, the Consumer Attorneys of California, if they could find any language in the original version of AB 2496 that would suggest otherwise. They did not identify any language in response to NIAC’s request that would have had the effect of providing immunity to FFAs for their own wrongdoing.
Would the original language of AB 2496 have reduced the counties’ liability for harm to foster children?
California counties already have limited government immunity that FFAs do not. Counties would have retained liability for any harm to foster children caused by county employees. What the original language of AB 2496 offered was to prohibit counties from contractually transferring their legal liability for any wrongful actions of county employees to FFAs.
The idea was this would motivate counties to proactively mitigate risk related to their own administration of the foster care system.
Would the original language of AB 2496 have left survivors of abuse without recourse and unable to seek justice?
Does AB 2496 deny children overseen by FFAs the right to seek the same compensation afforded to every other abused child and adult?
No. The bill’s original text included provisions to limit California FFAs’ liability to instances in which an FFA’s acts or omissions caused harm to a child. In cases where the FFA did their job correctly, and did nothing wrong, it would have prevented plaintiffs from collecting judgements from these innocent FFAs.
In short, a child that has been harmed would have every right to collect damages from the guilty party. However, no jury should be allowed to award damages for that harm from an innocent party, simply because the jury understandably felt bad that a child that was harmed. That is the specific loophole in judicial process that the original language of AB 2496 sought to close.
FAQ: The Martinez Case
In the Martinez case, did abuse happen at the FFA?
The abuse did not happen at an FFA, or because of the FFA.
The abuse happened in the resource home by a foster father with no prior history of abuse.
The FFA performed their due diligence on this resource home competently and professionally.
Did Mr. Martinez fail to answer questions on a necessary background check?
Much has been made about “missing” questions on the initial background check performed by the FFA. What is not reported — and is in the court transcript — is that all missing questions were fully answered in a follow-up interview between Martinez and the FFA. It was a typical part of the FFA’s process and procedure to follow up on any missing details, and the FFA did their due diligence as they should have.
Moreover, the follow-up interview did not reveal any concerning prior behavior.
Omitting these details misrepresents the facts of the case.
Did Alternative Family Services not assess Mr. Martinez’ mental health?
Alternative Family Services did everything that was required by the state of California to vet Mr. Martinez.
Did the FFA in the Martinez case do anything wrong?
Referring to the transcript of the Martinez case, the county testified that the FFA did not do anything wrong to cause them to miss an unforeseeable criminal act of the foster parent.
Does the Martinez case “utterly refute” NIAC’s contention that the FFA did nothing wrong? Why is NIAC appealing this verdict?
NIAC stands by the FFA in this case. The FFA did everything right and nothing wrong. It is NIAC’s opinion that there were legal errors made by the judge in this case. The appellate process in California, and all states for that matter, serve just this purpose — to correct judicial mistakes.
Why did the jury find the FFA at fault?
NIA interviewed a juror from this case after the trial. The juror claimed that the jury knew the FFA did nothing wrong, but they felt bad for the child and just wanted to give the child a large monetary award.
How much did the jury award?
NIAC was ordered to pay tens of millions of dollars. NIAC has been forced to post a bond for $27 million.
Why did NIAC risk going to court if the stakes were so high?
In this case, NIAC knew the FFA did everything right and nothing wrong.
NIAC had high confidence that the jury would not award a judgement against an innocent party. In other cases, NIAC had been paying many large settlements to avoid going to trial. In this case, it was absolutely clear that the FFA was blameless. NIAC determined prior to the AFS case that if the acts of this FFA were not defensible in a court of law in California, no case would ever be.
