Just What is Adequate Liability Coverage?
September 2001
by Jeff Wyatt
Accidents can happen in family child care. Here are some real examples:
- A preschooler loses his finger when it's caught in a sliding glass door.
- A two year old breaks her leg when she fell off a toilet seat she was standing on to reach the sink.
- An 18-month-old child strangles to death on a ribbon holding a pacifier around her neck.
According to Liz, "The quickest answer to the question of how much business liability insurance family child care providers should get is 'the most protection you can afford.' I say this because this varies among providers. Some insurance is better than none.
"However, when you take a step back and look at it, the answer becomes 'the most protection that is available.' Taking into consideration that the limit purchased today could pay claims that surface well in to the future leaves this as my answer.
"Twenty years ago most commercial general liability policies covering all sorts of exposures were written with $100,000 limits (maximum coverage per incident). In 1981 this was an adequate amount to close a lawsuit. (At this time there was no aggregate, a total dollar limit of coverage allowed by the policy. This includes medical expenses, damages for bodily injury, property damages, damages for personal injury, and advertising injury liability). However, this amount seems completely out of line by today's standards. How many parents would be satisfied with $100,000 in exchange for their child's life or, worse yet, their child's life long disability?
"As a population, we are constantly being fed the 'lottery' mentality. By this I mean, 'why purchase a lotto ticket when the winnings are a mere one million dollars? Only Powerball winnings are worth your while; today's winnings are up to $290,000,000!!!' With this mentality where does it all end? At what point is a person actually satisfied with the amount of the award in a lawsuit?
"Given the potential for child-related claims being brought forth many years after an incident takes place, how much could the potential lawsuit of the future be? How much insurance should we buy today for the claims of tomorrow? 'As much as is available,' I say.
"As of this writing the highest limit available for any one occurrence (event) is one million dollars. This is what needs to be purchased assuming the provider can afford to purchase this limit. If not, then the most they can afford to purchase becomes the answer. Until the legal system becomes more realistic in the amounts that are awarded in a lawsuit, this answer will not change.
"I am certain that the insurance carriers can give you reams of data on the amounts of settlements and legal expenses paid on behalf of their clients. Your eyes would pop. Many of the claims are fraudulent or petty. We are living in an instant gratification, you-owe-me world.
"Buy the most protection that is available, that you can afford. That's my answer."
