March 3, 2014
Put Preparation to the Test
In classrooms across the country, school administrators lead faculty and students through mock disasters (fires, shootings, bomb threats, tornados, etc.) to ensure the existence of sound safety plans, communicate expectations to all involved, and determine any necessary changes or improvements.
A failure to drill potential disasters can lead to catastrophic results, generally with little or no warning. In the midst of a crisis it’s too late to prepare; the catastrophic event simply reveals whether the organization took reasonable steps to prepare for a foreseeable event.
A sexual abuse allegation can cause significant difficulty, and organizations serving children should ‘drill’ to better address these issues:
Is a sound sexual abuse safety system in place?
Do all staff and volunteers understand their role?
Are changes or improvements needed?
Failure to prepare for this risk can lead to catastrophic results.
Are your staff and volunteers prepared?
How would your safety system ‘respond’?
A Sexual Abuse Fire Drill is essential
Assume an allegation related to a staff member, volunteer or participant is received by your organization. For purposes of this exercise, assume the allegation involves multiple victims and the accused is a trusted staff member or volunteer. With these ‘facts’ in mind, walk your organization through all existing responsive steps, including:
- Insurance Coverage issues and required notices and responses;
- Statutory Reporting Requirement actions and responses; and
- Organizational Safety System elements and required responses.
- As to existing insurance coverage, the drill is designed to answer these questions:
Does the organization have the correct coverages for a multi-victim claim?
- Does the organization have sufficient coverage (limits) for a multi-victim claim?
- Are there endorsements, riders, limitations or qualifications related to coverage?
Most child-serving organizations purchase insurance coverage through an insurance agent. During the insurance purchase or renewal process, the primary coverage issue negotiated relates to Property & Casualty (P&C). The P&C portion of the premium will typically account for the majority of the total insurance premium. Without an explicit Sexual Misconduct endorsement, sexual abuse claims typically fall within General Liability policy coverage – most general liability coverage will now include a separate sexual misconduct section. Few policyholders are familiar with the terms of the General Liability policy, the limits related to any sexual abuse claim, or terms requiring notice to the carrier when the organization ‘receives facts that could give rise to a claim’.
Recently, the law firm (Love & Norris) was retained by an organization facing sexual abuse allegations related to a trusted staff member, with four female victims, aged seven to nine. When asked, organizational leadership indicated that the organization had insurance providing $1 million/$3 million in coverage. When asked whether their insurance carrier was notified when the initial ‘facts’ came to light, leaders replied ‘no’.
At this point, it was too late to ‘drill’.
Three significant shortcomings were revealed.
First, the organization could not recall the name of their insurance agent. As a result, the organization could not quickly and easily understand what coverage was in place: Commercial General Liability Policy (CGL), Errors & Omissions Policy (E&O), Directors & Officers Policy (D&O) and/or Umbrella Policy. The delay was critical due to the fact that the crisis unfolded on a Saturday.
Second, the underlying policy did NOT provide $1 million/$3 million in coverage. Upon closer inspection, the policy included a specific ‘Sexual Misconduct’ provision which limited coverage to $100K/$300K for sexual abuse claims. There was no E&O, D&O or Umbrella Policy.
Third, leaders indicated they were informed about the allegations early on, but failed to notify criminal authorities or their insurance carrier because the reports were ‘hearsay’.
In the midst of crisis, the organization learned its insurance coverage was grossly inadequate, and it was too late to supplement or improve coverage amounts. In this case, the carrier ultimately paid the $300,000 aggregate, and satisfied its obligation under the CGL policy, and the organization was forced to absorb defense costs and indemnity out-of-pocket.
Before crisis hit, the organization should have secured sufficient coverage limits, and considered acquiring additional supplemental and umbrella policies. When queried concerning the efforts of the organization’s insurance agent, the organization’s leader/CEO responded that the agent relationship was inherited from a predecessor; and leadership did not know the identity of the agent or have contact information.
Notice to Insurance Carrier
Additionally, leaders (and therefore all staff members) were unfamiliar with specific state reporting requirements related to an allegation of abuse or neglect (discussed below in Reporting Requirements), as well as the ‘notice’ requirement contained in all insurance policies.
The ‘notice’ provision generally reads like this:
In the event the insured receives information about facts that could give rise to a claim, the insured is required under this policy to notify the insurance carrier immediately, but not later than 24 hours.
The organization received an allegation several months earlier, but considered the information ‘hearsay’ – an oral report from a parent about inappropriate touch described by their seven-year-old daughter. This communication should have triggered a communication by the organization’s representative to their insurance carrier. Failure to notify an insurance carrier in this circumstance can result in a ‘reservation of rights’ or a denial of coverage by the carrier. Either scenario places the organization in an adversarial position with its insurance carrier. In the above situation, the carrier weighed its options and simply tendered its limits because the aggregate ($300,000.00) was insignificant compared to the cost of filing a Federal Court lawsuit seeking a Declaratory Judgment against the organization (seeking a court finding that the organization breached its duty to notify the carrier, which relieves the carrier of its obligations to provide indemnity or defense).
The Sexual Abuse Fire Drill can be helpful in assessing insurance availability and sufficiency. By assuming a multi-victim allegation involving a trusted staff member or volunteer, the organization may evaluate all insurance instruments for potential coverage (CGL, D&O, E&O, Umbrella, etc.), confirm limits provided, and clearly understand any limitations. The organization should include its insurance agent in this evaluation.
The organization’s leadership should clearly understand when to notify the carrier, and what information to include. A timely and proper notification to a carrier is far more likely to occur when staff members have been trained to understand the risk of sexual abuse and the common behaviors of sexual abusers. Some entities receive information, but do not appreciate until much later that the information received clearly provided ‘facts that could give rise to a claim’. As a result, it is important that the organization’s staff members and volunteers have a practical understanding of the ‘grooming process’ of the sexual abuser, and that leaders understand the specific requirements of each policy concerning notification of the carrier.
A Note on Insurance Agents
An organization’s insurance agent fills an important role in the organization’s risk management effort. The agent should have a strong understanding of the organization’s industry, coverage needs, unique risks, and methods to reduce these risks. Too often, an agent can assist an organization in the purchase of Property & Casualty coverage, but remains ill-equipped to address the risk of sexual abuse and related coverage needs for a particular organization. Part of the Fire Drill should be an evaluation of the insurance agent to satisfy the organization that the agent is familiar with the unique risks that face the organization and necessary safety system elements to reduce risk in light of legislation and licensure issues. As well, an agent should be able to assist the organization with reporting requirements to the authorities and insurance carrier when necessary.
State Law Reporting Requirements
Every state in the United States has legislated reporting requirements related to child abuse and neglect. These requirements vary state by state, but all states have defined ‘mandatory reporters’; adults who are required by law to report suspected abuse or neglect. In some states, all adults are mandatory reporters. In others, specific professionals or individuals in child-serving positions are mandated to report abuse or neglect. Organizational management should research state reporting requirements in the areas it provides services, and train personnel to understand and apply relevant state reporting requirements.
Because all states have legislation protecting ‘good faith reports’ of abuse or neglect, it is always best for organizations providing services to children to err on the side of protecting the children they serve by reporting suspected abuse or neglect, whether mandated to do so or not.
Sexual Abuse Safety System
Many organizations are operating without an adequate system to reduce the risk of child sexual abuse. Unfortunately, many organizations serving children cannot effectively evaluate this risk, because sexual abuse is a risk its leadership and management personnel do not understand.
It’s impossible to prepare for a risk that you don’t understand.
Before a ‘Fire Drill’ has value, an effective SAFETY SYSTEM must be in place.
To assess SYSTEM effectiveness, these questions should be answered:
- What safety system is in place, and what are its specific components?
- What constitutes a ‘reasonable safety system’ for your program? (What is ‘enough’?)
- Does the SYSTEM include training components for staff members and volunteers?
- Does it include an effective screening process?
- Do staff members and employees know ‘what to do’ when an allegation is received?
Read an overview of the 5-Part Safety System.
The purpose of a ‘Sexual Abuse Fire Drill’ is to ensure an organization has appropriate insurance coverage and a sound safety plan – prior to a crisis. This Drill is also an important opportunity for an organization to communicate expectations to all involved, and determine necessary changes or improvements. In the midst of a crisis it is too late to prepare; the catastrophic event simply reveals whether a child-serving organization took reasonable steps to prepare for a foreseeable event – an allegation of sexual abuse.