Rate Trouble at Nonprofits
Insurance Costs Rising in Wake of Sex Abuse Claims

By Rachel Brand
Rocky Mountain News [Denver CO]
March 27, 2004

For Kitty Balsley and the children she tries to help, the letter brought disheartening news.

Big Brothers Big Sisters of Denver hasn't been hit with a claim of sexual abuse since Balsley took the helm in 1993. Nonetheless, the executive director was informed in December that her liability insurance would climb 50 percent, to $48,000.

"I think everybody knows why (rates) have gone up," Balsley said. "It's been really clear to anybody who has been reading the newspapers for the past year.

"It translates right into how many kids you're serving."

Churches, summer camps, day-care centers and youth organizations across Colorado and the U.S. are facing rising liability insurance rates in part because of the sex scandal that has -engulfed the Catholic Church, insurance experts say.

"Once we start seeing that people are being taken to court for millions of dollars, rates will go up," said Alejandra Soto, a spokeswoman for the Insurance Information Institute.

Since 1950, Catholic dioceses in the U.S. have paid out at least $650 million in counseling and settlement costs to victims, and 60 percent of the costs were covered by insurance companies, -according to a recent report by the John Jay College of Criminal Justice in New York.

The Archdiocese of Denver's insurers have paid nearly $1 -million in counseling and settlement costs to victims.

Soto said youth and church -organizations should expect rate increases of 30 percent to 40 percent this year, and that organizations offering one-on-one activities will have the most trouble finding insurance.

Boys and Girls Clubs of Metro Denver strictly prohibits one-on- one interaction. Children who join after-school activities at its eight Denver centers are always supervised by two or more adults. The nonprofit also fingerprints and runs criminal background checks on staff and volunteers.

Still, Kathy Daley, vice president of finance, learned last September that her liability insurance would jump 34 percent, to $175,000, this fiscal year. The nonprofit's sexual abuse and molestation coverage jumped 60 percent to $40,000.

"That's almost two full-time staff people to work with kids. Whereas two years ago, we didn't have to buy (sexual abuse coverage) at all. It was part of our -umbrella," Daley said.

Similar increases are affecting YMCAs across the country, said John Medler, chief executive of YMCA Services Corp., a for-profit subsidiary for about half the nation's 975 YMCAs.

"The pricing in the last two to three years has literally tripled," he said, adding that a typical -YMCA that might have paid $5,000 for a $2 million coverage now pays $15,000 for a $1 million coverage.

The Archdiocese of Denver said liability insurance rates for its 39 schools, Catholic Charities and affiliated organizations also have gone up, but wouldn't -supply a percentage increase or total price.

"Our premiums have gone up just like everyone else," said spokesman Sergio Guiterrez.

Some insurance experts say that liability rates are going up because of Sept. 11, 2001, and -general industry cycles.

Institutional investors are divesting because the U.S. property and casualty industry has offered "lousy returns" - 6 percent - over the last 10 years, said Barrett Hubbard, vice president of marketing for Markel Insurance, a company that underwrites thousands of summer camps.

"Historically, equilibrium has been elusive for the insurance business - thus the vicious market cycles that are a hallmark of our business," Hubbard said.

The rate increases are taking place while the overall number of child sexual molestation cases has dropped.

Department of Justice data shows that substantiated child abuse cases fell 40 percent between 1992 and 2000, to 89,500 from 150,000.

But claims settlements have spiked, experts say.

"It used to be churches could go in, and say, 'We really didn't do much,' " said Jeff Hanna, an expert in insuring church organizations. "We're finding that's shifted significantly. Juries are saying, 'You of all people should be taking care of these people.' "

Hanna works for GuideOne Insurance, an insurance company that writes sexual abuse coverage for 30,000 religious organizations, some in Colorado.

He remembers moving to a new community, joining a church and becoming a youth pastor within a week.

"Those days should be over," he said, adding that churches should wait six months before -letting new members work with kids.

He also encourages criminal background checks for every worker and volunteer except Sunday school teachers.