EARLY CARE & EDUCATION LAW UNIT CHILD CARE LIABILITY INSURANCE

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1 EARLY CARE & EDUCATION LAW UNIT Publication Date: July 2013 CHILD CARE LIABILITY INSURANCE Importance of Insurance This handout provides child care businesses with information about insurance. Purchasing insurance is a method of shifting risk from your child care business to an insurance company in exchange for a premium, which is the payment you make for an insurance policy. If you have insurance, your insurance company may pay the cost of certain accidents that occur. As a child care provider you must be proactive both about risk management and being responsive to the families in case an accident occurs while a child is under your care. When an accident occurs, if you do not have insurance you may be exposed to a substantial financial loss. Insurance Legal Requirements for Family Child Care Providers In California, family child care providers are required to have one of the following three: 1) Liability insurance ($100,000 per event or $300,000 collectively) covering injuries to clients and guests due to the negligence of the licensee or employees; OR 2) A bond in the amount of $300,000; OR 3) Written affidavits signed by parents of children enrolled in your program demonstrating their acknowledgment of your lack of insurance. i Liability insurance generally covers payment for accidents that are covered by your insurance policy as well as any legal costs of defending you. Although the law does not require that you carry liability insurance, Public Counsel strongly recommends that you purchase insurance to protect yourself and your business. While you have the option to obtain written affidavits from parents of children enrolled in your program, this does NOT guarantee that a parent will not sue you if their child is injured in your program. The parents affidavits merely acknowledge that you do not carry liability insurance. Page S. A r d m o r e A v e., L o s A n g e l e s, C A P : /

2 Other Types of Insurance Besides liability insurance, there are other types of insurance you may want to consider. The following is not an exhaustive list but provides child care providers with a short list of the type of insurance policies you may want to inquire about when talking to an insurance broker. 1. Worker s Compensation Insurance covers injuries to employees in the operation of the business and is required by CA state law if your business has any employees. 2. Business Automobile Insurance covers damage to property or bodily injury caused by the operation of your vehicle in your business, such as during field trips. 3. Business Property Insurance covers damage to your own property caused by your child care business. 4. Business Interruption Insurance covers some income lost if your home is damaged in a natural disaster and you have to stop conducting business in order to make repairs. 5. Crime and Fidelity Insurance covers situations in which your business is the victim of things such as robbery or employee dishonesty and theft. 6. Umbrella Insurance Policies can provide extra coverage if the cost of an accident, such as the death of a child, exceeds the policy limits of your other insurance policies. More information, including a glossary of common insurance terms, can also be found in the guide to commercial insurance at the CA Department of Insurance website: consumers/0060-information-guides/0030-business/commercialinsurance.cfm. Tips for Talking with Insurance Carriers and Brokers and Reviewing Insurance Policies This section provides a brief overview of some ideas to consider when talking to an insurance broker/carrier and purchasing a policy. Please keep in mind that these are only general suggestions and that this section does not discuss all of the many considerations that may be relevant to purchasing the best policy for your business. 1) Before calling an insurance broker, gather the following information: who lives in the home, who will be in the home during the hours of child care, whether your landlord should be covered by the policy, how many children will be in your care, whether you will drive children on field trips, whether you will dispense medication, and what areas or aspects of the home have a chance of creating injury to children in care or to the property of others (such as a pool or pet). It is important to disclose detailed information about your business and home when buying insurance. If you do not tell the insurance company about hazards or risks on your property, the insurance company may claim that you were not honest on your application and refuse to pay for an accident for which your insurance policy normally provides coverage. Page S. A r d m o r e A v e., L o s A n g e l e s, C A P : /

3 2) Before calling an insurance broker, look over your other insurance policies (such as homeowner s and auto insurance) and get a sense of what coverage they provide. If provided with complete information about your business and other insurance policies, insurance brokers should be able to help you identify what levels of liability insurance or other types of insurance you may want to buy to ensure that you are protecting your business from any risks that are present in the operation of your child care. Consider using the same broker and insurance company for all of your insurance policies, including homeowner s, auto, and business liability since they will be familiar with all the different policies you have purchased and what is covered by each policy. 3) Before calling an insurance broker, glance over the glossary of insurance terms in the guide to commercial insurance at the California Department of Insurance website: business/commercialinsurance.cfm. It is good to be familiar with common insurance terms and procedures during your conversation with your broker/carrier. It is important to understand key terms in order for you to know exactly what the policy will cover so that you can determine whether the policy will adequately protect you from the risks of running your child care business. Always make sure to ask follow up questions if you do not understand something. 4) Before calling an insurance broker, think of a few likely and unlikely accidents that could occur in the operation of your child care business. Before speaking with an insurance broker, think of what types of accidents you would like your insurance policy to cover. By talking about a few scenarios with the broker, you can get a better sense of how the policy will function if an accident occurs and you need the insurance company to make a payment. 5) During your conversation with a broker, ask whether the policy will offer coverage on a claims made or occurrence basis. A claims made policy will only pay for accidents that may be covered by your insurance policy and which the insurance company is notified of during the time you have insurance coverage. An occurrence policy will pay for accidents that may be covered by your insurance policy and that take place during the time you have insurance coverage, regardless of when the insurance company is actually notified of the accident. Therefore, if you do not currently have insurance but you notify your insurance company of an accident that occurred when you had insurance, the occurrence policy would cover the accident as long as it occurred when you had insurance and may have been included in the terms of your coverage. 6) At the end of your conversation with a broker, request a copy of the insurance policy so you can review it before purchasing insurance. Page S. A r d m o r e A v e., L o s A n g e l e s, C A P : /

4 You have a right to and should review the actual insurance policy before you purchase it. Some companies may send you a summary of your benefits rather than the actual policy; you should demand a copy of the full policy and read it carefully before purchasing coverage. Make sure you know what type of insurance coverage you are getting, what accidents it covers and the maximum amount your insurance company is willing to pay for costs related to an accident. There are many things to look for when reviewing an insurance policy. We cannot list all of them here, but check for the following: that the correct people are covered by the policy, that the policy is for the correct number of children in care, and that you know whether certain types of accidents will be excluded from coverage (like pet-related injuries). The table at the end of this document also may give you an idea of the types of factors to look for when reviewing your policy. 7) If you have any questions after reviewing the policy, call your insurance broker or carrier and ask them to go over the questions that you have. If you do not understand any part of your policy, be sure to call your insurance broker or carrier and ask them to explain. It is very important that you understand exactly what risks are covered by your insurance policy so that you can adequately protect your assets from the risks of running your child care. 8) Keep your insurance carrier updated about any changes to your business. If there are big changes to your business (such as caring for a larger number of children or installing a trampoline) contact your insurance carrier to let them know. You may have to purchase expanded coverage to cover your new situation, but if you do not let the insurance company know about changes to your business they can claim that you misrepresented the conditions of your business and refuse to pay for an accident that would usually be covered by your insurance policy. Liability Insurance Carriers The following table provides you with a list of insurance carriers that provide liability insurance coverage for family child care homes. This list of available carriers is not an exhaustive list and is only meant to provide you with general information. This is not a referral. While we encourage you to obtain liability insurance coverage, Public Counsel s does not endorse or recommend any particular insurance company, including any of the companies on this list. We cannot and do not guarantee the accuracy of any of the following liability insurance carrier information, and urge you to contact these companies directly if you are interested in their policies. You should carefully review the policy with the company s agent and should not rely on the information in this listing if it does not match the terms of the policy you are offered or decide to purchase. Page S. A r d m o r e A v e., L o s A n g e l e s, C A P : /

5 Services, Contact Information Policies can only be purchased online at: (800) (818) (860) (888) Rafael Mendoza Ext 108 For Questions, call (888) php m/childinc.htm Cost of premium for a $100,000/$300,000 policy for Small Family Child Care business 1-8 kids = $376 + $45 (membership fee to Child Care Services System ) *this rate is for policies with $300,000/$600,000 limits 1-8 kids = $ : $467* 7-12: $700* 13-18: $905* *premium reduced by $5.95 for each child below the maximum 1-8 kids = $325 Premium increases with each additional child 1 kid: $438 8 kids: $676 Cost of premium for a $100,000/$300,000 policy for Large Family Child Care business Admitted insurance company in CA? 7-14 kids = $672 + $45 (membership fee to Child Care Services System ) *this rate is for policies with $300,000/$600,000 limits see above pricing 7-14 kids = $561 Premium increases with each additional child Lic # kids: $ kids: $905 Lic # NAIC Page S. A r d m o r e A v e., L o s A n g e l e s, C A P : /

6 Services, Does coverage include Professional Liability/Negligent Supervision? Are all residents of the household covered for negligence (including those not employed in the child care operation)? No, only employees are covered. Immediate family living in the home are covered. If the person has a boarder/renter, they are ineligible for a policy No, only individuals performing functions of child care are insured, and spouse if sole proprietor Are all residents of the household and employees also insured for child abuse coverage? No, only employees are covered., employees are covered but household residents are only covered if they are immediate family. $100,000 limit for each occurrence, $100,000 for aggregate No, only individuals performing functions of child care are insured, and spouse if sole proprietor Are all legal expenses paid for at Administrative Hearings?, limit is $5,000, if the claim is covered, but only up to the policy limits Depends on the hearing. Abuse and endangerment are covered, but fingerprint and paperwork are not No legal expenses are paid for administrative hearings only. Legal expenses are paid if claim is filed. Page S. A r d m o r e A v e., L o s A n g e l e s, C A P : /

7 Services, Are claims covered for libel or slander? Are there exclusions or limitations for animals in the family child care home? The policy covers bodily injury caused by animals $25,000 per occurrence/$50,000 aggregate limit All animals in care and control of the provider are excluded, but other neighbor s pets are covered Pet must be kept separate from the children at all times. Exclusion for Akitas, Bull Mastiffs, Dobermans, German Shepherds, Pit Bulls, & Rotweilers. All injuries due to pet animals are excluded. Injuries due to pet animals are covered under a separate policy called Accident Policy. Are swimming pools on the premises covered? Wading pools are ok, but swimming pools are excluded., if licensed Trampolines excluded, up to 18 and not exceeding 8 x 8 Are swimming pools off the premises covered? No Page S. A r d m o r e A v e., L o s A n g e l e s, C A P : /

8 Services, What is the deductible that the provider must pay for each claim? None None None None Does the policy cover nonemergency extended hours of care?, if less than 24 hours. If no assistant, provider can only provide 16 hours of care a day., but there may be an additional charge if regular operation is over 17 hours per day or provider operates on Saturday or Sunday. What is the maximum limit per child for accident medical payments? Medical = $10,000 Dental = $1,000 Medical = $10,000 per incident. Accident and Health = $20,000 per incident, $250,000 aggregate $20,000 per child per accident, $10,000 for dismemberment, $5,000 for accidental death $20,000 per child, per accident Will the policy pay for accidents regardless of other insurance coverage? Is there an additional charge to cover your landlord? No No, $50 No Page S. A r d m o r e A v e., L o s A n g e l e s, C A P : /

9 Services, Can additional coverage be added for transportation? No No. Includes insured person, employees, and volunteers automobiles. No Can coverage for a non-owned auto be added?, for $112 No No Payment plan available?, through Pay Pal account This document was prepared by Public Counsel s Early Care & Education Law Unit in July 2013 and is meant to provide general information. This document is not all-inclusive and is not intended to provide any individual or entity with specific legal advice. Receiving this document does not create any lawyer-client relationship. For questions or comments, please call the ECE Law Unit s Intake line at 213/ ext by Public Counsel. Please contact Public Counsel if you plan to make multiple copies and/or plan to charge for distribution of this product. i See California Health and Safety Code Page S. A r d m o r e A v e., L o s A n g e l e s, C A P : /