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Insurance official: historic sexual‑abuse claims are driving childcare liability crisis
Summary
A state insurance study found payouts for historic sexual‑abuse claims have surged and are outpacing premiums, making sexual‑abuse coverage the principal driver of market stress for child‑care and child‑placing agencies; OIC advised options including safe harbors, a victims’ compensation fund and federal coordination.
The Office of the Insurance Commissioner (OIC) told providers that a surge in historic sexual‑abuse claims — not property or general liability losses — is the primary driver of escalating child‑care liability costs and reduced market availability.
David Fort, who presented OIC’s December report, said actuaries reviewed 10 years of premium and claim data and interviewed child‑care entities, brokers and trade associations. While property and commercial‑auto markets remain broadly available, sexual‑abuse and molestation claims have increased sharply in frequency and severity: OIC cited a jump from about $5 million in paid claims (2019–21) to more than $30 million (2022–24) statewide for relevant lines.
Fort said premiums charged for those exposures are now ‘‘in alignment’’ with loss experience — but the scale of historical payouts has left the market exposed. In some segments, premiums collected were far smaller than claim payments in the same period, a pattern that drives insurers out of the market or to nonrenew coverage. Child‑placing agencies and group foster homes face especially acute coverage vulnerability.
The OIC studied whether a joint underwriting association (JUA) could restore availability but found a JUA would still need sufficient funding to cover actuarial losses and therefore would likely be unaffordable without a subsidy. The report proposed other options: (1) statutory safe harbors or changes to the legal standard of fault to reduce exposure for complying providers; (2) a victims’ compensation fund to remove sexual‑abuse payouts from standard commercial policies; and (3) coordinated federal/state action to address long‑tail historic claims.
Providers said they were encountering nonrenewals and requested clearer guidance on how licensing monitoring documentation factors into underwriting. OIC and DCYF said they will continue discussions and publish the full report and FAQs; OIC also plans interstate discussion among insurance commissioners and outreach to federal delegations.
