Insurance Costs Increase in Wake of Abuse Scandal
Child-Care Centers, Youth Agencies See Rates Climb
By Erin Kosnac
Port Huron Times Herald [Port Huron MI]
Downloaded March 8, 2004
Debby Bailey has been busy getting A Child's World day care up and running in her Clyde Township home.
There's paperwork to fill out, rooms to decorate and surveillance cameras to install.
Bailey wants the cameras installed so parents can watch what their children are doing during the day. But she also wants them for her own peace of mind.
"Nobody can come back and say I've been molesting their child," Bailey said. "All I'd have to do is show them. Everything would be recorded."
The sexual-abuse accusations against the Catholic Church not only have caused organizations that work with youth to become more aware of the possibility of such claims, they're also part of the reason many organizations are paying more for protection against them, an insurance industry analyst said.
Any organization that deals with children -- from locally owned day-care centers to national YMCA programs -- can expect increases in their insurance costs, said Robert Hartwig, chief economist for the Insurance Information Institute in New York City.
"The sexual-abuse allegations haven't been limited to the Catholic Church, but there's been so much attention given to the claims," Hartwig said. "Now, any organization that is entrusted with the welfare of youth is going to be paying the price."
Hartwig said insurance companies have paid out some hefty amounts for sexual-abuse claims against a variety of organizations that work with youth. To try to protect themselves against the cost of future claims, Hartwig said insurance companies are raising their rates.
"They have to defend each case, even if it is meritless," he said. "Even in the most meritless case, it can cost them thousands or even more. And there goes the cost of insurance for everyone else."
Blue Water Area organizations dealing with youth have seen increases, but don't all agree the accusations against the church are part of the cause.
Across the industry
Bailey hasn't decided on an insurance provider yet, but she's gotten several quotes. She said these quotes are in line with what she was told to expect.
"It's just crazy to even think that what's going on in the church could affect us," she said. "What's happening there shouldn't have any effect on what's happening at my day care."
Hartwig said the increases could vary based upon the agency and if it ever has had any claims filed against it. The increase also is dependent upon the amount of insurance an agency has. Hartwig said policies that provide the most protection have increased 30% to 40% in each of the past two years.
Michigan Child Care Insurance Services provides insurance for about 1,400 child-care centers, preschools and day cares in the state. Among the insurance offered is coverage for sexual molestation and abuse claims.
Terrie Mathison, senior account executive with the Livonia agency, disagrees with Hartwig.
Mathison said rates have not been increasing that dramatically. She said the rise in costs for coverage fits with normal yearly increases throughout the industry.
"This is just a reflection of the industry," she said. "Rates are rising on all kinds of insurance."
Big Brothers Big Sisters agencies have seen 20% to 30% increases in their insurance rates during each of the past two years, said Mack Koonce, chief operating officer for the agency, based in Philadelphia. Big Brothers Big Sisters has offices in Lapeer, Caro and Southfield that serve the Thumb.
Koonce said insurance companies have told the agency increases are due to concerns that sexual-abuse claims will escalate, and trends in litigation settlements and jury awards.
Koonce said the average agency pays more than $10,000 for insurance, with larger agencies paying $50,000 to $100,000. Because of these increases, Koonce said the agencies won't be able to serve as many children, and some might have to reduce staff size.
Paying more for less
About half of the nation's YMCAs, including the YMCA of the Blue Water Area in Port Huron, have insurance coverage through YMCA Services Corp.
"Coverage for sexual-abuse misconduct has always been a special concern," said John Medler, president and chief executive officer of YMCA Services Corp. "But now with everything going on with the church, it's an even bigger concern."
Medler said costs for insurance have doubled, and less coverage is provided.
"But the YMCAs are lucky," he said. "A lot of nonprofits now can't even buy insurance that will include sexual-abuse coverage. Insurance companies just don't want any part of that."
Tim Reinhard, business director at the YMCA of the Blue Water Area, anticipates rates will go up 10% to 15%, but not because of the scandal involving the Catholic Church.
"Nobody's ever told me that the church has caused us any problems," Reinhard said. "The bigger impact on our insurance was what happened on 9/11, not the allegations about the church."
Reinhard said the facility has a number of areas including the day care, playground, pool and gym that keep insurance higher for the YMCA than for most nonprofit organizations. He said adjustments, such as additional fund raising, could be done if needed to offset the higher insurance costs.
"Any increase to our costs is going to impact how we do business," he said. "If we want to continue to offer the same services to the community, we'll find a way and make sure we do it."
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