You Are Uninsured

How executives can manage risk and advocate for their organizations

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During more than 20 years of insuring child welfare organizations, I've spoken to child welfare professionals who seemed confident that a tragedy would never take place on their watch. I've also known those who, I suspected, lay awake at night overwrought about all the things that could possibly go wrong. I believe that most, though, are somewhere in the middle of this continuum--keenly aware of what can go wrong, but convinced they've done all they know to do, and therefore ready to move on to the next challenge.

All human services agencies, because they work with people, cannot predict every situation they may face, and this is even more true for child welfare agencies working with children. This unpredictability makes it impossible to insure against every single possibility, thus you--and every other child welfare organization--are uninsured in some ways. Learning how to manage and prepare for risk, whether covered by insurance or not, is important to the endurance of every organization.

One Agency's Story

Not long ago, a social worker in a well-respected residential facility was told by an adolescent girl in care that a staff member had raped her. What followed was a story that every child welfare professional dreads hearing. The girl, Tina*, told how three months prior a male child care worker in his midtwenties, Dave*, began hitting on her. She returned the attention by flirting with him. After a couple weeks, they began a physical relationship. They agreed to keep their relationship a secret from the other girls and staff. They planned their meetings around Dave's days off and time that Tina could go unnoticed by others.

When Tina told the social worker, calls were made, reports were filed, and investigations ensued. Dave began by denying the whole thing, but eventually told his side of the story, saying that it was Tina who came on to him. Initially, Dave remembered all the training he'd received about what to do when a girl who had been sexualized acted inappropriately. It wasn't long, though, before Dave's hormones overruled the training, policies, procedures, and what he knew was right.

Tina's mother brought a $10 million lawsuit against Dave for his wrongful acts, and against his supervisor, the CEO, the board, and the organization for failure to properly supervise Dave and Tina. The claim was turned over to the insurance company, which provided a defense lawyer who had never defended a child welfare organization.

The insurance company lawyer was unaware of the regulations that govern licensed residential care facilities for youth. She was unaware of the Standards of Excellence for the Management and Governance of Child Welfare Organizations guidelines published by CWLA, which the facility had adhered to for years, or the significance of the organization's COA accreditation. She failed to point out that the facility had a better staff-to-child ratio than required, that they provided more hours of continuing educational training than required, and that a child welfare organization can't possibly be held vicariously liable for the criminal acts of a willful perpetrator. With Dave and Tina trying to keep their relationship a secret, there's no way Dave's supervisor, the CEO, the board members, or the organization could have known that something inappropriate was going on.

The case went to trial and the jury returned a verdict in favor of Tina and her mother. Dave had already been arrested and was awaiting his criminal trial. He had no separate insurance and no assets, so the award would be the burden of the organization. The organization was obligated to pay a $1 million award plus a $2 million punitive damage award. Punitive damages are awarded specifically to punish wrongdoers. Consequently, they are typically uninsurable. Imagine the shock of the CEO and the board when they learned that the insurance company would pay the $1 million award, but that the organization was responsible to come up with $2 million.

The organization in this case was actually fortunate that the insurance company paid the award and the defense costs in full. Some insurance policies don't cover the costs of defending an employee accused of wrongdoing, some don't cover any expenses related to a claim involving a criminal act, and some pay defense costs out of the limit of the policy. Other insurance policy exclusions commonly found that limit or eliminate coverage entirely include physical or emotional injuries resulting from sexual misconduct, sportsrelated activities, and malpractice in social work, psychology, nursing, and the work of any other licensed professionals.

So, how can you best protect yourself and your organization? There are several questions every executive should ask themselves: (1) How can we best manage both the risks we can, and those we cannot, insure against? (2) How can we best advocate for ourselves in the event of a tragedy? and (3) How can I know if the insurance carrier I've chosen understands how to effectively defend child welfare professionals and organizations? Let's take a look at each of these questions individually.

Managing Risk

The job of risk avoidance or lessening is enormous, but it can be broken down into manageable tasks, some of which can be delegated or outsourced. The steps in this ongoing process include:

  • building a team of allies that will assist in objectively assessing the risk;
  • assessing the areas of risk by program, location, population, and every other factor that could influence outcomes;
  • training staff in the areas identified in your assessment as potential weaknesses;
  • making your organization desirable to insurance carriers;
  • gaining support in the community by establishing a favorable reputation;
  • developing well-placed allies within the media;
  • building relationships with peers within the local, state, and national child welfare community; and
  • mastering the essentials to becoming your organization's best advocate.

Assessing Risk and Training Staff

Your allies in risk assessment should include a lawyer that is an advocate for your organization so that all information gathered and reviewed will be attorney-client privileged. To shore up any weaknesses, you must be willing to collect and evaluate information that includes the good, the bad, and the ugly. The more genuine and accurate the data, opinions, and suggestions gathered, the more valuable your risk assessment will be. There are consultants who can create and administer anonymous surveys, which should include all levels of staffing so that a 360-degree snapshot of the organization can be achieved. A do-it-yourself, less expensive option is available through online survey websites such as SurveyMonkey.

A very important component of your attorney-client privileged risk assessment is a spreadsheet that includes every child-related incident, every work-related employee injury, programs, locations, populations, months, days of week, times of day, and any other relevant information. From this spreadsheet, patterns may emerge that show frequency, severity, and types of situations. With this data, staffing adjustments and program decisions may be made in an objective manner. For example, if your spreadsheet shows that a high percentage of restraints involve one staff member, you may want to revisit conflict resolution training with that person or move the staff member to another location.

Once you've identified weaknesses and made any staffing or program adjustments, train your staff to identify the precursors for the most frequent incidences and injuries and consider offering an incentive for the program, location, or team that reduces their frequency.

Handling Tragedy and Building Allies

You are your organization's best advocate. In the true story at the beginning of this article, the outcome might have been different if the insurance company had provided a defense lawyer who understood the work of the organization, or if the CEO or board president had educated the claims adjuster and lawyer on best practices in child welfare.

If you are aware of the best defenses of your work--among which are the responsibilities set forth in the state regulations for the licenses you hold (this would include staff to child ratio, supervision protocol, continuing education training, and so on), your program statement, what associations and accreditation bodies stipulate are reasonable standards, and contractual responsibilities you have agreed to--you can educate claims adjusters and defense lawyers about the specifics of your work, your authority, and responsibilities. You can "campaign" for your organization with your defense team, with the community and child welfare allies, and with the contacts you've made in the media.

The investment of time in educating people about the important work of caring for youth and families can pay off in powerful ways, because people who believe in your work are more likely to advocate for you rather than against you. Relationships with local business owners, community club members, reporters, and local politicians may lead to those supporters standing by you in the event of a tragedy.

If you will take the time to develop positive relationships with local, state, and national reporters, those folks will be less likely to criticize you and far more likely to give you the benefit of the doubt, or at least a balanced report, in the event of a tragedy. Maintaining relationships with former residents and employees can also be helpful because these people are more likely to make positive comments rather than potentially damaging comments to reporters following a tragedy or ugly allegation. A first step in developing connections with reporters is following their articles and commenting on them online or e-mailing the reporter directly.

Expert witness testimony can be extremely helpful or equally as harmful. Building relationships within the child welfare community can minimize the possibility of peers providing expert testimony against you in the event you or your organization is sued. Another aspect of developing allies within the child welfare community is maintaining membership in good standing with well-respected associations and accrediting bodies.

Finding the Right Insurance

In years past, it was difficult to find an insurance company that wanted to provide comprehensive insurance coverage to child welfare organizations. Now there are a number of insurance companies in the marketplace. Your job is to choose the insurance company that understands the work enough to handle an emotionally charged, child-related claim; provides coverage and limits that adequately address your particular exposures, assets, and contract requirements; is financially stable enough to pay a claim brought years into the future; and charges a reasonable premium.

Once you've identified that insurance carrier, make the organization desirable to the underwriter who will be assessing the submission made by your insurance broker. Participating in the compilation of the submission rather than delegating that responsibility to your broker can save thousands of dollars annually. Remember that the insurance company underwriter doesn't have the benefit of observing your program. He or she must make their coverage and premium decisions based on the information provided by your broker.

Your broker will never communicate about your work as well as you will, so writing a letter to the underwriter explaining the details of a claim or actions taken to prevent an injury from happening again, providing an outline of education and training provided to staff, offering a tour, and sending along a brochure, video, or success stories highlighting children you've served can all help influence the underwriter in a positive manner. Imagine what you might send to someone considering making a fivefigure donation. Your underwriter may be more inclined to provide pricing relief if they understand your organization, claim history, policies, procedures, and best practices.

There are few child welfare insurance specialists in the United States, but an insurance professional educated in the risks and realities of caring for youth and families can be extremely valuable. One additional issue worthy of mention is to avoid the conflict of interest that can result from doing business with insurance professionals who serve on your board.

All these things are important, but with state limitations on what is legally insurable, plaintiff's attorneys finding new ways to make child caring organizations liable for everything that could possibly go wrong, and insurance policy exclusions that could leave organizations paying out-of-pocket for an uninsured claim, in the end, doing your best to care for the children in your charge and the staff you employ is your best risk management strategy.

Rhonda Sciortino was a ward of the court until she emancipate at age 16. She became the youngest licensed insurance agent in California when she was 17, and started her first insurance organization, Human Services Insurance, when she was 27. She went on to found Child Welfare Insurance Services, which she recently sold to Markel Insurance Company, and has joined forces with them in the role of Child Welfare Specialist. She recently released her first book, From Foster Care to Millionaire.

To comment on this article, e-mail voice@cwla.org.

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