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 Had it passed, NIAC would have rescinded all of the nonrenewals previously issued and all coverages for FFAs in California would have continued uninterrupted.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 the FAQ below. NIA’s Member and Broker Services team may also be contacted at brokerservices@insurancefornonprofits.org.
Frequently Asked Questions – California Foster Family Agencies
Updated October 4, 2024
Which states are affected by this nonrenewal?
The nonrenewal of Social Services Professional Liability (SSP), Improper Sexual Conduct and Physical Abuse Liability (ISCPA), and Directors & Officers Liability (D&O) for nonprofits with foster family agency (FFA) operations affects California members only.
Will the nonrenewals of D&O, ISCPA, and SSP coverage for FFAs extend beyond California?
At the current time, NIA has no plans to cancel or nonrenew FFA coverage in any other states.
I have heard rumors that this decision affects nonprofits nationwide. Is that true?
No. This decision affects California FFAs only, which represent fewer than 150 of NIA’s 27,000+ members.
Our organization has been asked to merge with another FFA, port/transfer children that have been previously approved by another organization, etc. Can these exposures be added to our policy through the end of the policy term?
In addition to the ISCPA, SSP, and D&O nonrenewals, NIA will not be accepting any additional California FFA exposures added under the new provisions of AB 2496.
Excluded services 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 NIA’s 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.
Our nonprofit understands NIA’s decision regarding the porting or transfer of children as noted above. However, our FFA has made the decision to merge with/acquire another California FFA and its child placements. What should our organization do to report this change in operations to NIA?
If you take on any additional responsibilities related in any way to resource homes under the provisions of AB 2496, NIA will consider this a material change in your operations and grounds for immediate cancellation, rather than nonrenewal, of all policies in force with NIA.
Please report these changes in operations to NIA as soon as possible so that the cancellation process may begin. Per the terms and conditions of your policy, NIA will issue 60 days’ notice of cancellation resulting from this material change.
Our organization does not plan to adopt the relaxed child placement process permitted by AB 2496. Instead, we will maintain our high standard of care that exceeds state requirements. As a result, can an exception be made to renew our SSP, ISCPA, and D&O coverage?
For FFAs, the safety of the children in their care is of utmost importance, so it is no surprise to hear from many members that they will maintain their current safety standards rather than implement the less-rigorous vetting process now permitted by AB 2496.
Unfortunately, NIA is unable to make an exception to the nonrenewal guidelines at this time. As passed, AB 2496 has provided the ability to make transfers with a less-rigorous vetting process.
Longstanding rules that had been in place to ensure child safety during the transfer of resource home approval process 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.
Can NIA continue to write the SSP, ISCPA, and D&O for the rest of my operations and just exclude the FFA portion?
No. Due to potential overlapping exposures, NIA is unable to provide this option as long as you continue FFA operations of any type.
Will NIA continue to write D&O, SSP, and ISCPA for foster care programs that do not involve resource homes, like Short-Term Residential Therapeutic Program (STRTP) and Transitional Housing Placement programs (THP)?
Yes, subject to underwriting approval, these remain eligible so long as the organization is not engaged in FFA operations.
Our nonprofit operates an Adult Family Home Agency (AFHA), are we still eligible for ISCPA, SSP, and D&O coverage with NIA?
Yes, AFHAs are still eligible for coverage so long as the organization is not engaged in FFA operations.
Our nonprofit surrendered our license to place children in resource homes. Can NIA continue to insure our nonprofit without this exposure?
Yes, NIA will consider insuring the nonprofit moving forward, subject to receipt, review, and acceptance of the following documentation PRIOR TO QUOTING:
- Signed written statement on the organization’s letterhead certifying the specific date on which they ceased providing such services; and,
- If the organization holds a contract with a governmental agency for FFA and/or adoption services, NIA must receive written confirmation of the date such contract terminated.
Our nonprofit plans to renew the coverage lines NIA is able to offer us. Should we anticipate any changes to coverage at renewal?
Each member is underwritten on an individual basis, so NIA encourages its members to connect with their broker to discuss changes to coverage, limits, and terms at renewal.
Please note, NIA will be adding a Foster Family Agency Exclusion endorsement to all NIAC Improper Sexual Conduct & Physical Abuse (ISCPA) and Social Services Professional (SSP) Liability policies effective January 1, 2025.
Will an Extended Reported Period (ERP) be offered if my D&O, ISCPA, or SSP included Prior Acts coverage and/or was written on a Claims-made basis?
In most instances, an optional one-year ERP may be considered according to the policy terms. This ERP 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.
Consult with your underwriter for eligibility, terms, and pricing.
Eligible members will be asked to provide up to 10 years of currently valued loss runs if insured with another insurance company prior to binding with NIA.
Note: NIA is unable to offer more than a one-year ERP.
Our FFA has been insured with NIA for quite some time. Our previous carrier provided ISCPA and SSP on a Claims-made form, and when we moved to NIA, we were provided an Event Trigger policy with Prior Acts coverage for the Claims-made years with our prior carrier. Last year, NIA changed our ISCPA and SSP forms from Event Trigger to Claims-made, continuing to honor our Prior Acts coverage from several years ago. If we purchase the one-year ERP offered by NIA, will this apply to our one year of Claims-made ISCPA and SSP coverage and the Prior Acts coverage?
Yes, the one-year ERP, if purchased, will afford the member one additional year to report claims under their Claims-made policy as well as their Prior Acts coverage.
Our broker needs more time to seek alternative quote options. Can my coverage be extended to allow time to find a replacement carrier?
Unfortunately, no. NIA has worked diligently with state legislators to find a resolution to insurability concerns while other insurance companies exited the marketplace. NIA is unable to provide further coverage extensions in the absence of a fair legislative solution.
Our broker found replacement coverage, including ISCPA and SSP, with another insurance company. If we opt to cancel our coverage mid-term to move to another carrier, will we be subject to a short-rate premium penalty?
No, NIA will not impose any premium or rate penalties should you wish to replace coverage before your expiration date. Earned premium will be calculated pro rata based upon your chosen date of cancellation.
Where can I find more information about NIA’s legislative efforts in California?
Up-to-date information on NIA’s legislative efforts can be found on NIA’s AB 2496 advocacy page.
Can you refer our organization to other insurance companies offering this coverage for foster care programs in California?
The insurance market is always changing, and the best contact to find alternatives is through your insurance broker. NIA is unaware of any other programs that offer similar coverage, but will advise brokers if and when that changes.
NIAC members that are also members of California Alliance of Child and Family Services (CACFS), are encouraged to contact CACFS directly to see if other insurance programs are available.
We are a resource family seeking liability coverage for our personal liability. Where can I obtain coverage?
The state of California offers licensed foster family homes access to liability coverage via The Foster Family Home (FFH) and Small Family Home (SFH) Insurance Fund. The fund provides liability insurance coverage for foster parents related to incidents in providing foster care services.
Our nonprofit is domiciled outside of California but is responsible for resource family placements in California. Do these nonrenewals apply to our nonprofit?
Yes. Any member with FFA operations in California will receive notice of nonrenewal for ISCPA, SSP, and D&O.
Our nonprofit previously received notice of nonrenewal for all lines of coverage. Is this changing? Is our nonprofit now eligible to renew GL, Auto, Property, and Umbrella?
First, please ask your broker to contact your underwriter for eligibility. If eligible for GL, Auto, Property and/or Umbrella coverage, NIAC is agreeable to rescinding notices of nonrenewal on these lines of coverage.
To expedite the renewal quoting process, please send the following to your broker as quickly as possible:
- Completed and signed Lost Policy Release (LPR) forms for ISCPA, SSP, and D&O canceling those coverages effective at least one day before your policy expiration date; and
- Complete renewal submission, to include completed NIAC renewal application, loss runs, schedule of values, vehicle schedule, and any applicable Acord applications.
I have a carrier that will quote ISCPA and SSP but must also write our GL coverage. Can NIAC offer Property and/or Auto only in this instance?
No, NIAC must insure GL to offer any other lines of coverage.
Our nonprofit FFA is not currently insured with NIA but is in need of GL, Auto and Property coverage. Can NIAC offer quotes on these lines for a new account?
No, NIAC is not writing any new FFA nonprofits at this time.
Will ANI consider new FFA nonprofits in other states outside of California?
No, not at this time. Due to the volume of new FFA quote requests nationwide, NIAC and ANI have placed a moratorium on any new FFA business.
I’ve heard rumors that NIAC is filing for bankruptcy. Is this true?
No, this is completely untrue. NIAC is proud of its A (Excellent) rating from AM Best. NIAC’s financials are also available as a point of reference.
Brokers and/or carriers have approached our organization to let us know that NIA is making “drastic changes” to its appetite and planning to nonrenew other types of nonprofits as well. Is this correct?
No, this is not correct. NIA prides itself on transparency. If an underwriting change is made that impacts our members, NIA will surely communicate this to its members and their brokers first.
If you haven’t heard this information from NIA, it likely isn’t true.
Please contact Melissa Dalske by phone at 831-621-6031 or by email with any questions.
