SANTA CRUZ, Calif. — Nonprofits Insurance Alliance (NIA) respects the California Court of Appeal and the role courts play in protecting foster children and ensuring accountability. We also recognize that the Court of Appeal found error in the standard applied by the trial court. However, this holding will not solve the insurability crisis nonprofit foster family agencies are facing. Significant barriers to obtaining affordable, comprehensive coverage remain.
In its holding, the Court of Appeal urged the executive and legislative branches to consider actions to address this systemic problem. California Insurance Commissioner Ricardo Lara has repeatedly highlighted the severity of this crisis, stating that many nonprofits are on the verge of losing their insurance and urging for-profit insurers to step in. To date, those calls for help have gone unheeded, and the market remains broken. Unfortunately, the Court of Appeal’s holding does little more than preserve the current broken status quo, and leaves many of California’s foster children at risk as agencies struggle to obtain insurance.
At issue in the appeal was whether foster family agencies who substantially complied with State requirements should be held liable when they had actual knowledge of a specific danger, or whether liability should also extend to constructive knowledge (what they “should have known”.) If misapplied, this standard allows endless second-guessing after the fact about what other methods the foster family agency possibly could have used to determine a person’s propensity to abuse others.
NIA believes accountability should either be grounded in actual knowledge or based on reasonable foreseeability under the constructive knowledge standard. Either standard allows foster family agencies to be insured and to continue serving children, while still holding agencies responsible for all due diligence required by the State, and liable only when they knowingly fail to act, or could have reasonably foreseen the harm.
Unfortunately, the Court of Appeal allowed the jury to substitute 20/20 hindsight instead of requiring the jury to apply the reasonable foreseeability standard. The liability standard applied at trial permitted foster family agencies to be held strictly liable for any mistake, regardless of whether it was a substantial cause of the harm. While the Court of Appeal determined that a strict liability standard was wrong, their findings did not provide a proper test for constructive knowledge. They suggest that must come from the executive and legislative branches.
NIA had hoped it could resume insuring foster family agencies in California if this court ruling established an insurable standard of care. Sadly, that was not the outcome. Foster children pay the price when insurance and placements disappear.
About NIA
Nonprofits Insurance Alliance (NIA) is the nation’s leading liability and property insurer exclusively serving nonprofit organizations.
Founded in 1989 in Santa Cruz, CA, NIA is a social enterprise focused on the long-term sustainability and management of risk in the nonprofit sector. NIA has one of the best customer retention rates in the industry.
NIA members enjoy fair and equitable insurance pricing, specialized insurance coverages, dividends, and innovative risk management and member resources.
The NIA group brand is comprised of Alliance Member Services (AMS) and three insurers rated A- (Excellent) by AM Best: Nonprofits Insurance Alliance of California (NIAC); Alliance of Nonprofits for Insurance, RRG (ANI); and National Alliance of Nonprofits for Insurance (NANI).
All organizations under the NIA brand are 501(c)(3) nonprofits. Learn more about Nonprofits Insurance Alliance at insurancefornonprofits.org.
