SPRINGFIELD — Insurance companies are reducing the scope of coverage for some community foster agencies in Illinois, leading to higher costs, diminished coverage and fewer options for agencies who say a continuance of the trend could lead to closures.
If the situation worsens, some foster agencies warn they will have to shut down, sending children in their facilities back under the care of the Illinois Department of Children and Family Services, an agency advocates say doesn’t have the capacity to handle an influx of foster children.
In Illinois, DCFS contracts with community-based foster agencies in order to house and provide services for children in state care. The department reported that the state had about 20,000 foster children in 2024, with more than 4,000 of them in the care of community-based foster or group homes.
These agencies are licensed by DCFS and must have many types of insurance to operate, including liability insurance, which protects them against claims resulting in injuries or damage to property.
If a person sues DCFS and seeks damages, the highest amount they can receive in damages is capped at $2 million – which the state recently extended to foster parents. Lawsuits against community-based agencies, however, do not have a cap. And in recent years, many agencies have faced lawsuits resulting in large payouts or settlements.
In 2018, the father of a 2-year-old boy who died after Lutheran Social Services of Illinois placed him back in the care of his mother sued the foster agency, seeking $45 million in damages.
LSSI placed Lavandis Hudson back in his mother’s care in late 2010. Around six months later, he was rushed to the hospital with severe injuries, where he ultimately died.
The Chicago Tribune reported that a medical examiner ruled Hudson’s death “a homicide caused by multiple blunt-force injuries resulting from child abuse.” Hudson’s mother was charged with first-degree murder in 2012 but has not yet faced trial.
A jury awarded $45 million in damages, although the payout was ultimately about half that due to a deal struck by both parties late in the trial, according to the Tribune.
Other similar lawsuits against foster agencies have resulted in large payouts across the country, even in instances where agencies have denied wrongdoing and claimed negative outcomes were beyond their control. In turn, insurance companies that provide liability coverage for the agencies are taking monetary hit after hit – and raising premium prices or reducing their offerings in response.
The insurers say the risk is too high to continue to insure foster agencies. After a case in California was settled in December for $15 million, Nonprofits Insurance Alliance of California, the main liability insurance provider in the state, announced it would not renew any agency plans and pulled out of California entirely.
Now, that organization is sounding alarm bells as it begins to scale back coverage in other states, including Illinois.
Andrea Durbin, CEO of the Illinois Collaboration on Youth, said in an interview that the crisis is a “very complicated issue.”
“I think people who have been harmed should have opportunities to recover from that harm,” she said. “The complexity of it is, how do you make sure that people get the kind of restitution that they’re entitled to without also completely undermining the community-based infrastructure that serves kids and families today?”
Reduction of coverage
In an interview with Capitol News Illinois, Pamela Davis, the founder, president and CEO of Nonprofits Insurance Alliance, or NIA, said the organization had never previously done a mass nonrenewal like the one in California. She said insurance companies are struggling to distinguish low-risk foster agencies from high-risk ones, since agencies who are doing a “good job” and those who are doing a “bad job” are getting sued the same.
In Illinois, NIA scaled back its coverage by placing $1 million limits on the coverage that protects agencies against claims for physical or sexual abuse, known as Improper Sexual Conduct and Physical Abuse, or ISCPA, coverage. This means that if a foster agency is sued for sexual or physical abuse, NIA will only cover up to $1 million of the settlement – even as many lawsuits are being settled for much more.
Usually, insurance companies offer umbrella coverage beyond the company’s limit. But NIA is also no longer providing umbrella coverage for ISCPA coverage or social services professionals coverage, which protects the agencies’ social workers if they’re sued for misconduct.
The company has also significantly increased the cost of ISCPA coverage, the effects of which were felt by The Center for Youth and Family Solutions – an Illinois provider of child welfare, behavioral health and youth services – which is insured by NIA.
The Center is one of the largest foster agencies in the state, serving more than 1,200 foster children across 37 counties in Illinois. Its CEO, Patrick Phelan, said the total cost for the agency’s professional liability insurance in 2019 was a little more than $45,000. When his agency renewed its insurance earlier this year with NIA, the cost was more than $1 million.
“These costs are going up to the point where, at over $1 million, I could hire 22 family support workers,” Phelan said. “I could go out and hire 22 more people if I was back at my 2019 rates. The impact of this on families is becoming just incredible.”
Phelan said he had to lay off staff and cut additional services in order to pay the insurance bill.
“There are minimums in our contracts that we have to staff positions at, and we’ve always been staffed far higher than the ratios that are demanded by the state contracts,” Phelan said. “But we’re getting closer to being back towards the actual levels. We’re just ultimately worried that the services we provide to our kids and families are going to suffer.”
As costs have increased, Phelan said the agency experienced a decrease in coverage.
“There’s really only two insurers left in Illinois who are offering coverage and neither of them will write a new policy,” Phelan said. “So, if our insurer decides they’re not going to renew us next March, we don’t have the opportunity to go out in the traditional market and find any other insurance. There’s just this huge risk of not being insured going forward.”
Durbin said some agencies simply can’t afford this increase, and since traditional carriers are also not taking any new clients, foster agencies aren’t able to drop their coverage in search of lower rates elsewhere.
“Whether it’s affordable or not is almost completely out of the question at this point because there’s fewer and fewer insurers who are willing to even be in the marketplace,” Durbin said.
In a statement provided to Capitol News Illinois, DCFS called the crisis a “national issue”, saying that “while DCFS is aware of some providers who have received notices of non-renewal for their current insurance, DCFS is not aware of any providers who have been unable to subsequently obtain liability insurance, albeit at a higher cost before their current policy ends.”
Durbin said although it’s “technically correct” to say that no agencies have been unable to find insurance, she’s aware of four that have been dropped by traditional insurance carriers like NIA. She said these agencies were then forced to get insurance through excess and surplus lines, which is a market that sells insurance to cover things traditional insurance companies have deemed high-risk and won’t cover.
“It’s much more expensive for less coverage and just a lower quality kind of insurance product and so it’s a different risk pool,” she said. “So instead of going with the sort of traditional insurers, now you’re in this very high-risk market that’s much more expensive.”
Potential legislation
Illinois lawmakers have filed legislation aiming to curb this crisis, although it hasn’t gained traction this session. Senate Bill 1696, sponsored by Sen. Laura Fine, D-Glenview, and House Bill 3138, sponsored by Rep. Suzanne Ness, D-Crystal Lake, have been described by advocates as “short-term” solutions.
The bills would give agencies immunity from civil liability for two years unless the agency engages in “willful and wanton conduct,” defined as deliberate intention to cause harm, or unintentional harm due to “utter indifference to or conscious disregard” for a child’s safety. The bills would also create a task force to develop and recommend a permanent solution to lawmakers by the end of 2026.
Joseph Monahan – a trained social worker, founder of a Chicago law firm and a member of the Board of Directors at Preferra, a liability insurance company for over 100,000 behavioral health professionals – called the proposal a “start.”
He said some lawyers and advocates take issue with the legislation’s proposed immunity for agencies because they believe it would stop children who have been harmed from receiving “adequate compensation.” One solution some have offered, he said, is to move lawsuits against foster agencies under the jurisdiction of the Illinois Court of Claims, which he said would simply be a more “arduous process” for foster children to have to navigate.
Monahan also took issue with the bill’s proposal of a task force, saying the problem is well documented and arguing for more direct action.
Phelan said although advocates have a good grasp on the issue, he believes bringing everyone to the table to brainstorm a solution via a task force is worthwhile.
A national issue
Davis, the CEO of Nonprofits Insurance Alliance, said the company is also scaling back coverage in Pennsylvania and Florida while Monahan said agencies and advocates in New York and Nebraska are also raising concerns. That’s why advocates are calling for a federal solution.
Durbin said her organization has met with advocates in Illinois, other states, and Congress in an attempt to organize advocates on a national level.
Phelan said U.S. Rep. Darin LaHood, R-Ill., visited The Center’s headquarters in Peoria recently to tour the facility. But Phelan said “the number one topic” on his agenda was to discuss the crisis.
“We were sharing these challenges with him, really hoping that we can help and trying to get some interaction on a federal solution to the problem,” Phelan said.
Although advocates agree that children who are harmed should receive compensation for their experiences, they say the fact that foster agencies don’t have damage caps puts a “target on their back” that some lawyers take advantage of.
“A lot of the opposition is coming from the Trial Lawyers Association, who have recognized us as a source of organizations that can be litigated against,” Phelan said. “And they’re not seeing that, I think, our demise will ultimately leave them with nobody to sue.”
Illinois Trial Lawyers Association President Sara Salger said she “doesn’t know” if there’s been an uptick in the cases of abuse, but that the recent cases with large damage payouts have resulted from “awful cases” of foster children being abused.
“These are the most vulnerable group of people, so to put the solution on the backs of kids who have been abused or raped or, worst case scenario murdered, cannot be the solution,” she said. “It’s an insurance problem and it should have an insurance solution.”
She said she doesn’t agree that the solution to the issue is to indemnify foster agencies.
“There’s just been some awful cases that have resulted in these larger verdicts, but in those situations, the solution shouldn’t be not to hold people accountable for the harm they’re doing to foster children,” Salger said.
Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.
This article first appeared on Capitol News Illinois and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.
