Update: The below article explains a looming crisis in California related to the lack of liability insurance options available to nonprofit foster care providers, known in the state as foster family agencies.
Since we published, Gov. Gavin Newsom has signed AB 2496, legislation related to this issue. But the bill does not include any of the provisions sought by the Nonprofit Insurance Alliance of California, which currently insures the majority of foster family agencies, so the signing might not do anything to usher in a short-term solution here.
The bill does include some new flexibility to quickly transfer foster families from one nonprofit agency to another, or to the county. That may prove critical in the event that foster family agencies losing their liability insurance start to fold or pause operations.
Meanwhile, the Los Angeles County Board of Supervisors has instructed county leadership, via a motion approved at its September 24 meeting, to report to the board within 15 days on “possible solutions to the Foster Family Agencies insurance crisis.”
“Los Angeles County’s child welfare system relies on Foster Family Agencies as essential partners,” said Board Chair Lindsey P. Horvath, in a comment provided to The Imprint. “We count on FFAs to recruit and support individuals and families who open their hearts and homes to children entrusted to our care. It is imperative that we do everything within our power to protect them from exorbitant insurance rates so they can continue to do their incredibly important work. FFA’s stand by our kids and Los Angeles County intends to stand by them.”
Has foster care in California become uninsurable? For hundreds of the state’s nonprofit providers in the space, that may be the case by the end of the calendar year.
Nonprofit Insurance Alliance of California (NIAC), which insures most of the foster family agencies in the state, announced in August that it had issued non-renewal notices to all of those providers effective at the end of September. Which puts the fate of thousands of foster homes, and many of the approximately 9,000 children living in them, in flux as counties and the state scramble to figure out a solution that does not involve lots of kids going to shelters, group homes or offices.
Youth Services Insider has spoken with or emailed officials on all sides of this one: the state Department of Social Services; membership organizations representing the counties and the nonprofit foster family agencies (often just called FFAs); and NIAC. Following is a basic explainer of how this situation came about, a predicament that everyone involved agrees could easily be coming for other state child welfare systems in the near future. Here we go.
Many counties in California, including the state’s most populous, contract with foster family agencies to serve a portion of the youth in foster care, often including teenagers and kids with serious medical needs. There are just over 40,000 youth in California foster care, and about 9,000 are in homes managed by foster family agencies.
Those agencies have liability insurance which, among many other things, factors in when they are sued. And insurance sellers often turn around and insure themselves to offset some of their risk, a practice known as reinsurance.
For 90% of the state’s 220 foster family agencies, the insurer is NIAC; that statistic is indicative of the fact that insuring foster care services has not been a particularly popular sector among insurance companies.
The market for reinsurance has tightened recently, meaning it’s either more expensive or in some cases not possible to obtain. And in the child welfare space, this has occurred at the same time that changes in California law and policy have exposed foster family agencies to more lawsuits. The state has removed the statute of limitations on lawsuits related to child sex abuse, and recently completed a three-year window for lawsuits that could not have been filed under the previous statutes of limitations.
The net effect for insurers of foster family agencies, which for most is NIAC: more potential lawsuits, and less ability to offset their exposure to those lawsuits through reinsurance. NIAC officials told Youth Services Insider that its reinsurer has informed it that, absent changes to the status quo in foster care, it might not be able to continue to serve the alliance.
According to NIAC officials, things really came to a head in December of 2023 when a jury in Northern California awarded $25 million to three siblings who were sexually abused by a foster parent. One of the insurer’s clients, the Santa Rosa-based Alternative Family Services, is on the hook for 60% of the damages, though the case is currently on appeal.
NIAC feels strongly that Alternative Family Services was held responsible by a jury for something it could not have foreseen, and that its customer did everything asked of it to vet and manage the foster home (plenty of others disagree with them). So this legislative session, it has pushed for legislation to put new provisions in place that would make it tougher for such cases to get to the point of a jury deciding damages.
That legislation was titled AB 2496. Among its major provisions:
- A foster family agency could only be found liable if three things were true: it was shown that they violated a law or regulation, that the law or regulation in question was meant to prevent the injury that occurred, and that the violation of that law or regulation was the “proximate cause” of the injury.
- It increases the amount of time that an FFA and its insurer would have to respond to a time-limited demand for settlement to 60 days — the typical deadline now is 30 days — and requires that such demands come with specifics and evidence about the claim.
Several organizations focused on legal support for youth in foster care vehemently oppose what the law does, arguing that it creates barriers to legal action for those in the system that other children don’t face if their abuse comes through involvement with, for example, a youth group or a religious institution.
“These children — our legal children — should not be required, after all they have already endured, facing all the hardships we inflict upon them, to live under an experimental legal regime that offers to them even the remotest possibility of less compensation for their harms than the regime enjoyed by children raised by their supportive families,” said a letter written in opposition to the bill from the Children’s Advocacy Institute at the University of San Diego School of Law.
The bill passed the California Assembly, but was then replaced in the Senate by a new version that does not include the original provisions. In August, NIAC announced the non-renewal notices to all of its foster family agencies, effective at the end of September.
Which means that by the end of calendar year 2024, barring any other developments, nearly all of those agencies would be forced to choose between operating without insurance or closing their doors. All sources interviewed by Youth Services Insider agree that any agency put in that position would shutter, at least temporarily. By the end of December, according to NIAC, 54 foster family agencies would lose their coverage, leaving about 3,500 foster homes in flux.
We did not speak or email with anyone who seems to think any eleventh hour push to pass the original version of AB 2496 is afoot. So what happens next? Here are three possibilities, which in a state with 58 different county-led child welfare systems, could all end up coming into play.
New Insurers
On August 23, California Insurance Commissioner Ricardo Lara issued an urgent request for other insurance providers to consider providing options for the state’s foster family agencies.
The nonrenewals by NIAC “will likely force many FFAs to start shuttering their programs, thus upending the stability of the foster children and youth that they serve,” Lara said. “On a larger scale, thousands of foster children and youth are potentially at risk of losing their current FFA placement.”
Lara welcomed input from any provider that might consider expanding into this market but had concerns about the fundamentals of it.
“I welcome your thoughts on how to make this coverage more available and what barriers may exist so that together we may find solutions for this vulnerable population,” he said.
Perhaps that letter will draw some interest, though it would almost certainly mean higher insurance premiums that at least some foster family agencies could not afford. The idea of a state grant has been floated — the number $10 million has been thrown around — to sweeten the pot for a willing insurer. But one person close to the situation said they were told firmly that while the state is willing to help out with regulations or rules, new money is off the table.
Counties Taking Over
This is the most likely thing to transpire: at least some portion of foster homes currently managed by foster family agencies would become foster homes managed directly by counties, or by another nonprofit that is still insured. There is a process for doing this, though it can take a few months, which is why those conversations have already begun. And a recent update to AB 2496 includes some provisions aimed at simplifying and speeding up that path, especially when it comes to ensuring that those homes receive the same financial support.
Doable? Yes, but it is hardly a certainty that this will be smooth sailing. You are talking about adding, in some counties at least, oversight over hundreds of foster homes at a time when child welfare systems are plagued by high turnover and job vacancy rates. Are counties going to be able to staff up proportionately, or just heap more responsibility on current workers? Will foster homes that might be accustomed to prompt support from a foster family agency cease their participation if county workers aren’t as available and responsive?
Those concerns are behind the third possible outcome…
Management-only Contracts
One person close to the situation said the idea of new county-nonprofit arrangements that took some or all of the risk off the table for the foster family agencies has been discussed. In this scenario, the foster homes, and the liability attached to them, would port over to the counties, but foster family agencies would get contracted to manage them to avoid the need to swell the number of county workers.
