How to prepare for child sexual abuse claims

California Governor Gavin Newsom recently signed a law giving childhood victims of sexual abuse more time to decide whether to file lawsuits. Expanding the statue of limitations gives victims until age 40, or five years from discovery of the abuse, to file civil lawsuits.

The previous limit had been 26, or within three years from discovery of the abuse. It also suspends the statute of limitations for three years — beginning Jan. 1 — giving victims of all ages time to bring lawsuits if they wish.

Proponents of the law argue that more time to file a lawsuit would benefit victims that are too ashamed to speak up until later in life. On the other hand, organizations that work with youth, such as school districts and nonprofits, may be at risk of bankruptcy due to the high cost of the litigation process.

With survivors feeling empowered to finally speak up, insurance companies are preparing to see historical claims filed in unprecedented numbers.  Juries are looking to give justice to victims and are often awarding full insurance policy limits.  Nonprofits are having to address claims that have nothing to do with the current administration, and their reputation can be put to the test with a historical allegation that is completely out of their control.

How can nonprofits, especially those with high exposure to serving youth, prepare?

1. Have a plan in place. Don’t wait for an allegation to happen, assume it will. Consult a crisis management firm to prepare from a press perspective. Assign a single point of contact from your organization to be the spokesperson to any reporters. Do not allow any other employees of the organization to speak or post on social media.
2. Work with your insurance broker to find out how far back your organization carried Sexual Abuse & Molestation insurance. This coverage is often found within the Commercial Package policy that contains your General Liability Coverage.
3. Gather the following information for each year:
   1. Limit purchased (both in the primary and any Umbrella or Excess Liability policies)
   2. Know if the coverage is on an Occurrence form or Claims-Made form
   3. What insurance company the coverage was with
   4. The policy number

How will this affect the future of Abuse & Molestation insurance being offered by insurance companies? 

Nonprofits can expect to see significant rate increases, regardless of claim history. Many insurance companies need to build their reserves to cover impending claims.  Some insurers are capping the level of Abuse limits they will offer to a particular dollar amount.  In a few extreme cases, insurance companies are exiting the nonprofit space altogether and nonprofits will need to move insurance companies at their renewal. Make sure to talk to your broker on what your prior, current, and future exposure could be to these types of claims. If you don’t feel that your current risk management policy around preventing sexual abuse isn’t robust enough, your insurance carrier partner and broker can help you form a plan that is comprehensive.

NonprofitsSexual AbuseYouth