Today we’re joined by Simon Glairy, a leading expert in commercial insurance and risk management for the non-profit sector. He’s here to unpack the escalating insurance crisis threatening the very foundation of foster care in America. We’ll explore the real-world impact of skyrocketing premiums, the difficult trade-offs agency leaders are forced to make, the viability of state-level interventions like New York’s proposed assigned-risk market, and whether a federal solution is the only path to long-term stability.
New York’s proposed assigned-risk market would compel commercial insurers to cover foster care agencies. What are the potential benefits and drawbacks of this model, and how might it impact the long-term stability of both the agencies and the insurance market? Please share some specifics.
On one hand, this assigned-risk market is a desperately needed lifeline. When agencies are facing non-renewal notices and have nowhere else to turn, a program that requires carriers to provide coverage for professional liability and sexual abuse is a critical stopgap. It keeps their doors open. However, we have to consider the long-term health of the insurance market. Forcing carriers to take on risks they’ve deemed unsustainable could lead to them raising premiums across the board for all commercial clients to offset these new, mandated losses. It feels like a temporary patch on a deep wound, especially when you remember that in New York alone, agencies are grappling with around 800 lawsuits, and in nearly 40% of those cases, their original historical policies have been voided. This model provides immediate relief but doesn’t solve the core issue of massive, unpredictable liability.
We’re seeing foster care agencies in states like California and Connecticut face premium hikes from $300,000 to nearly $1 million. Beyond the immediate financial strain, what are the cascading effects of these costs on day-to-day operations, staff retention, and the quality of care for children?
The sticker shock is immense, but the true damage goes far deeper than the balance sheet. When an agency like The Village for Families and Children in Connecticut sees its costs triple in just a few years, that million-dollar figure isn’t just a number; it represents a massive diversion of resources. That money should be going toward training for foster parents, therapeutic services for children who have experienced trauma, or competitive salaries to attract and retain qualified social workers. Instead, it’s being poured into an insurance policy. This creates an environment of scarcity and intense pressure. You can feel the strain in the leadership, who are forced to make impossible choices. It ultimately erodes the very quality of care the agency was created to provide, which is a heartbreaking consequence for the vulnerable children they serve.
With claim values soaring—highlighted by a recent $25 million jury award—and many historical insurance policies being voided, how are agencies navigating this new legal landscape? What practical steps are they taking to manage immense financial exposure from decades-old incidents?
Frankly, they’re in an almost impossible position. The rules of the game have been completely upended. For decades, agencies operated with the understanding that their insurance policies would cover them. Now, with the elimination of statutes of limitations in states like New York and California, they’re being hit with lawsuits for incidents that allegedly occurred generations ago, and the insurance they paid for at the time is often being declared void. As Damien Zillas from the Nonprofits Insurance Alliance pointed out, the number of claims isn’t necessarily rising, but the value is exploding, as we saw with that staggering $25 million award. Agencies are left scrambling, trying to fund settlements and legal defenses out of their operating budgets. This means dipping into reserves, launching emergency fundraising campaigns, and, in the worst cases, facing financial ruin. The very real fear expressed by Kathleen Brady-Stepien of widespread financial failure is palpable across the sector.
Some agencies have been forced to reduce their umbrella policies drastically, in one case from $10 million to just $2 million. Could you describe the difficult trade-offs leaders must make in this environment and the potential consequences of operating with such reduced coverage?
This is a gut-wrenching decision that keeps leaders like Steven Girelli up at night. He described how Klingberg Family Centers faced an eight-fold premium increase while simultaneously having to slash their umbrella coverage by 80%, from $10 million down to $2 million. The trade-off is excruciating. You either pay an unsustainable premium that cripples your programs, or you accept a level of risk exposure that could bankrupt the organization with a single large verdict. Operating with such a thin safety net means that a significant lawsuit could easily exceed your coverage limits. The agency would then be on the hook for the remainder, which could be millions of dollars. It’s a gamble with the future of the organization and the stability of care for the children it supports. You’re essentially choosing between a slow financial bleed-out or the risk of a sudden, catastrophic financial event.
Given that some states have found solutions like joint underwriting associations to be unworkable, what would effective federal action look like? Could you walk me through the key components of a federal plan that could stabilize the foster care insurance market nationwide?
The fact that a state like Washington, after careful study, concluded that a joint underwriting association wouldn’t be viable is a powerful signal that this crisis may be too widespread and complex for a patchwork of state-level fixes. A robust federal plan would likely need several components. First, it could involve a federal backstop or reinsurance program, similar to what exists for terrorism risk, which would shield insurance carriers from catastrophic losses above a certain threshold. This would give them the confidence to re-enter the market and offer affordable policies. Second, federal action could help standardize liability frameworks to create more predictability for both agencies and insurers. Finally, a federal plan could include dedicated funding, perhaps similar to New York’s proposed $20 million bridge fund but on a national scale, to help agencies cover the actual costs of their insurance while the market stabilizes.
What is your forecast for the foster care sector over the next five years if this insurance crisis continues without a robust, multi-state or federal solution?
If we continue on the current path, my forecast is grim. We will see an acceleration of agency closures, creating what are essentially “care deserts” in some communities where children have no local placement options. We’ve already seen 19 foster family programs close in California alone. The remaining agencies will be forced to operate with dangerously low coverage, perpetually one lawsuit away from insolvency. This will inevitably lead to a reduction in services, larger caseloads for overworked staff, and, tragically, a decline in the quality of care. The system will become more fragile and less resilient, leaving the most vulnerable children in our society with even fewer supports. Without a comprehensive solution, the system as we know it could face a widespread collapse.
