Worse than if the state had done nothing.
The original language of The Foster Family Agency Accountability Act (AB 2496) was a measured attempt to make commonsense changes to existing law that would have made California FFAs insurable. Had it passed, NIAC would have rescinded all of the nonrenewals previously issued and all coverages for FFAs in California would have continued uninterrupted. That was our fervent hope.
We are sharing this communication now with the expectation that the final version of AB 2496, which unfortunately passed the legislature, will be signed by the governor. If that does not happen, we will send a follow-up bulletin with any required clarifications.
We have concluded that if this version of AB 2496 becomes law, it will be worse than if the state had done nothing.
NIA is nonrenewing D&O, SSP, and ISCPA for California FFAs.
It is our opinion that the new provisions of AB 2496 — drafted by someone unknown to us — materially and substantially increase the risk for California FFAs. Subsequently, NIA is now left with no choice but to nonrenew the Directors & Officers (D&O) coverage, as well as the Social Services Professional (SSP) and Improper Sexual Conduct and Physical Abuse (ISCPA) coverages, for all California FFA risks.
In addition to the ISCPA, SSP, and D&O nonrenewals, we will not be accepting any additional California FFA exposures under existing policies done under the new provisions of AB 2496. This shall include the provision of service of any type to children in a resource home that has been ported, certified, transferred or approved under the Health and Safety Code or Welfare and Institutions Code, as amended by AB 2496, acquisition of an FFA, the merger of two or more existing FFAs, the transfer of child placements following the closure or consolidation of an FFA, or the transfer or porting of resource home approval. These modifications will result in a material change in operations that falls outside of our underwriting guidelines. If your organization has, is in the process of, or plans to consolidate with, acquire, or accept the transfer of cases from another FFA or a county, this must be reported to NIA immediately as you will not have coverage for this additional exposure. If you take on any additional responsibilities related in any way to resource homes under the provisions of AB 2496, we will consider this a material change in your operations and grounds for immediate cancellation (rather than nonrenewal) of all of your policies in-force with us.
We must do this because of how California FFAs will now be able to transfer resource home approval to the counties or subsequent FFAs under this new law. As passed, AB 2496 has provided the ability to make such transfers with a less-rigorous vetting process. Rules that had been in place to ensure child safety during the transfer of resource home approval have now been relaxed. Not only is this dangerous for foster children, but it will also provide a field day for plaintiff attorneys to allege that FFAs’ failure to provide some random piece of information to the counties or subsequent FFAs during this less-rigorous process was the reason a child was injured.
The new provisions in AB 2496 substantially increase the risk to California FFAs and the children they serve.
Simply put, we believe AB 2496, as it is now written, can substantially increase the risk to California FFAs and the children they serve. We insured these FFAs under the standard of care in force at the time we insured them, but AB 2496 radically expands that risk.
Further, this change in the law will change the risk profile of California FFAs relative to their staffing levels and this was not contemplated when we issued the D&O policies that include coverage for employment actions.
What could have been an orderly transition will be anything but.
In short, when the current language of AB 2496 becomes law, the state of California will have assured that what could have been an orderly transition, will be anything but that for NIAC, the FFAs, counties, the resource families, and — most importantly — the children. This is a more regrettable outcome than we could have envisioned.
NIA expects to continue to insure CGL, Property, and Auto Liability and Physical Damage for California FFAs.
We expect to continue to insure other lines of business for California FFAs, except for the SSP, ISCPA, and D&O. We intend to continue these other policies (Commercial General Liability, Property, and Auto Liability and Physical Damage) in the hope we can create at least some measure of stability for California FFAs while they seek to find someone willing to insure the SSP, ISCPA, and D&O risks under the changes instituted by AB 2496.
If an organization has ceased all operations in any way related to resource homes and provides us with a signed certification of that, it is generally expected that we will be able to insure those organizations for their other operations for all lines of coverage, subject to our normal underwriting guidelines. Our team will work with insurance brokers to accomplish this with the least possible disruption.
As an organization whose only mission is to provide stable coverage options and risk management to 501(c)(3) nonprofits, this was a very difficult decision for NIAC’s board of directors. Our volunteer board members include a former deputy commissioner of the California Department of Insurance, as well as the leader of an FFA. You can be certain that we do not take these actions lightly.
Details about eligibility and how NIA will handle policy types are provided below:
Foster family agency (FFA) organizations operating in California are no longer eligible for SSP, ISCPA, or D&O coverage with NIA. This includes organizations engaged in:
- The oversight or monitoring of certified homes and foster parents/resource families
- Identification, recruitment, screening, training, approval, and/or certification of foster parents/resource families
- Providing support to foster parents/resource families
- Providing wraparound services, including but not limited to finding and/or placement of youth in foster/resource homes, including those providing respite or kinship care
- Foster-to-adopt services
If an organization has engaged in the above services in the past but no longer does, we will consider quoting their otherwise-eligible operations on a going forward basis. Prior to quoting, we must receive a signed written statement on the organization’s letterhead certifying the specific date on which they ceased providing such services. If the organization holds a contract with a governmental agency for such FFA and/or adoption services, we must receive written confirmation of the date such contract terminated.
Current NIA members in California that are engaged in the FFA operations described above will receive notices of nonrenewal for D&O, SSP, and ISCPA coverages at least 60 days prior to their policy expiration. Eligible FFA members that have already been issued nonrenewal notices by NIA will be given the option to rescind the nonrenewal if they agree to cancel their D&O, SSP, and ISCPA coverages by submitting signed Lost Policy Releases (LPRs). Upon receipt of signed LPRs, NIA will process endorsements removing/canceling D&O, SSP, and ISCPA from all applicable primary and Umbrella policies.
In most cases, we will offer an extended reporting period (ERP) for nonrenewed claims-made or prior acts policies. Any ERP offered will exclude coverage for claims involving any transfer or porting of resource home approval done under the Welfare and Institutions Code or the Health and Safety Code, as amended by AB 2496.
For additional details, please refer to this FAQ. NIA’s Member and Broker Services team may also be contacted at brokerservices@insurancefornonprofits.org.
