For health and human services organizations, the risk of a lawsuit – and the resulting damages – is not new. But the consequences can be especially devastating for agencies that work with vulnerable, at-risk populations, such as foster care services.

Unfortunately, all it takes is one significant lawsuit and legal settlement to wipe out the organization’s entire operating budget for the year – or worse.As a foster parent myself, I recently wrote an op-ed in The Philadelphia Inquirer outlining why many case workers and organizations lack critical information about foster children and their trauma histories. That lack of information has occasionally, and tragically, led to instances of abuse or injury, as publicized in two preventable negligence lawsuits against foster care organizations in 2012 and 2015.

In both of these and many similar cases, the immediate harm was to the children involved. And when such harm occurs, a litigation suit typically follows.It’s common for foster care agencies to be either private or non-profit organizations that are contracted through the city or state government to provide care to the youth within their network. When something happens, regardless of fault, governmental and sovereign immunity to lawsuits often leaves the non-profit holding the bag in court. In addition, specific officers and board members can be named personally in the lawsuit due to their elevated status in the community.

Unfortunately, there are many examples where the organization’s insurance declines defense coverage due to exclusions or ambiguous wording within the General Liability, Professional Liability, or Directors and Officers policies. In these cases, the organization and its named officers or board members are left to provide for their own defense – which can lead to higher demands from the prosecution and larger financial payouts.

These payouts become an immense financial burden on an organization that is already losing donor support, trust and morale from the litigation. And it directly reduces the quality and/or quantity of care the organization can provide. In the case of significant uncovered claims, it can ultimately be more than the organization can absorb.
While having a good advocate for claims and safety management will reduce the likelihood of an incident, nothing will completely prevent lawsuits. An organization’s next best defense is to work with an outside party, such as an insurance broker or paid third party, to audit internal processes and make recommendations for improvements in safety culture and administrative handling.

A good insurance broker will be up-to-date on case law and can regularly review policies to ensure the organization and its leadership are adequately covered. Scheduling an in-depth analysis of organizational coverage policies is worth the time expenditure. At a minimum, an analysis should include:

1. Property and Casualty Policies – A litigation suit will usually involve several policies, including General and Professional Liability policies. It’s important to find out which policy will provide defense, how the defense will be funded, whether there is a sub-limit that reduces the potential coverage, and especially whether an exclusion will cause a denial of coverage.
2. Leases and Mortgages – Reviewing these documents against the general liability and property policies will allow an organization to sort out what coverage requirements it is legally bound to in the agreements as well as whether its policies are ready to respond to events at or on the premises. Often, the coverage provided in the policies is insufficient to match what the lease agreements have bound, and an organization is on the hook for the gap in coverage.
3. Contractors – Any contracts with vendors such as subcontractors, landscape care, plowing, staffing agencies, transportation companies or maintenance companies should be reviewed to find out what liabilities the organization has retained or even gained, and what has been pushed to the subcontractor. A good insurance broker will help draft a subcontract agreement that is in line with your policies provisions and maximizes your risk transfer.

Understanding how each of these will work, preferably together, in an event is critical to determine where there are gaps. A true in-depth analysis or “stress-test” of the current risk management program can identify areas of vulnerability and practical solutions in advance – which could be the difference between survival and shutting the doors.

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