Penn State case raises nonprofits’ awareness of insurance for child sexual abuse

Mark Henricks

The Penn State child sexual abuse scandal is prompting nonprofit organizations across the country to question whether they’ve got adequate insurance to cope with such cases.

In the Penn State case, former assistant football coach Jerry Sandusky is accused of molesting 10 boys. The crimes allegedly happened during and after Sandusky’s tenure at Penn State and while he was involved in a children’s charity that he founded.

The limits of general liability insurance

When it comes to child sexual abuse, nonprofits often have far less legal protection than they think, says Gregory Williams, senior product manager at GuideOne Insurance, an Iowa-based issuer of child sexual abuse insurance policies covering 29,000 churches and religious institutions. Many nonprofits mistakenly assume that their general liability policies cover child sexual abuse claims. If it has only general liability insurance, a nonprofit generally is “going to find themselves out of luck if a sexual misconduct claim were to come in,” he says.

Jerry Sandusky is accused of molesting 10 boys in the Penn State child sexual abuse scandal.

Child sexual abuse liability insurance, also known as insurance against improper conduct or child molestation, is purchased separately from general liability insurance. General liability policies usually do not provide protection in cases of intentional harm done by employees, volunteers and others.

The costs of defending a child sexual abuse claim can be significant. Gregory Love, a Fort Worth, Texas, attorney who specializes in child sex abuse cases, cites the case of a plaintiff who sued a Dallas school and was awarded $9 million by a jury. Costs of defending the lawsuit were estimated at more than $1 million. Whether insurance would cover all of those costs depends on the amount of coverage and the number of plaintiffs.

About 66,000 cases of sexual abuse are investigated each year in the United States, according to the U.S. Department of Health and Human Services. And in instances like the one at Penn State, there may be far more than one victim. “When purchasing coverage, a nonprofit should keep this in mind so that it can negotiate the purchase of a policy that can truly cover the risks,” Love says.

The high cost of child sexual abuse insurance

Purchasing a policy that covers child sexual abuse is neither simple nor cheap.

Annual premiums depend on a number of factors, including whether an institution has an on-site day care center or a K-12 school. If a big church, for example, has a school or a day care center, premiums for child sexual abuse insurance could total $5,000 a year, according to Williams. A small church without a school or day care center might pay $1,000 a year.

That small church often would carry $100,000 to $250,000 worth of coverage for child sexual abuse. Meanwhile, a mega-church with a substantial nursery or school could have coverage of up to $1 million.

One factor in obtaining child sexual abuse coverage is whether a nonprofit has been hit with an abuse claim in the past. Having any claim history at all may make coverage impossible to get, Love says.

The value of risk management

Another important issue is whether a nonprofit has risk management practices in place, such as what steps to follow when an abuse allegation is made. Having a risk management plan can reduce premiums and even make the difference in whether a nonprofit can obtain coverage at all.

Melanie Herman, executive director of the Nonprofit Risk Management Center in Virginia, says conducting background checks on anyone who comes in contact with children served by a nonprofit is a fundamental part of risk management.

Williams says that if an adult were regularly left alone with a child, as has been described in some of the recent media reports about the Penn State scandal, this likely would make a nonprofit organization uninsurable.

GuideOne Insurance adheres to a “two-adult rule” when issuing child sexual abuse insurance, Williams says. This means always having two adults present when any child is around an adult. “There should be no single-adult-with-a-single-child scenario,” he says.

Love, the Fort Worth attorney, says proper training about child sexual abuse is key as well. The training needs to be done in a serious manner so that “it’s not all just lip service,” he says.

The delicate nature of child sexual abuse means nonprofits must deal with insurance agents or brokers who have experience with this type of coverage, Love says. That includes knowing how state laws affect insurance coverage for nonprofits.

While the Penn State debacle is focusing attention on nonprofits as potential havens for child sex abusers, Herman notes that more than 90 percent of child sexual abuse occurs in homes. “Overall, child-serving nonprofits remain very safe environments for children,” she says.