In California, there are currently tens of thousands of foster children, with approximately 15% being placed in foster families through nonprofit private Foster Family Agencies (FFAs). Due to major insurance companies announcing they will no longer renew or accept new policies for FFAs, these agencies will be unable to operate. Despite the passage of AB2496 by the state legislature at the end of August, which is now awaiting the governor’s signature, this temporary solution aimed at addressing the FFA crisis seems to have sparked an even bigger crisis.
Currently, in California, among foster children who have been in care for over two years, 15% have experienced five or more placements, and 44% have had three or more placements. More than half of foster children have been through negative experiences at least four times. Due to changes in family placements, school transfers, court hearings, and parental visits, foster children have a dropout rate of over 10%; while the high school graduation rate for foster students (53%) is much lower than the state average in California (83%).
One-third of homeless youth in the United States are in California, and the rate of former foster youth experiencing homelessness after leaving the welfare system ranges from 11% to 38%, significantly higher than the general population.
AB2496, the “Foster family agencies and noncustodial adoption agencies” bill, introduced by Gail L. Pellerin, a Democratic Assembly member for District 28, passed in the Assembly with a vote of 40-0 and in the Senate with a vote of 77-0 (2 absent) on August 30 and 31 respectively, awaiting Governor Newsom’s decision.
According to the bill, California has over 60,000 foster children, with around nine thousand placed in foster families through FFAs. The latest report from the Adoption and Foster Care Analysis and Reporting System (AFCARS) for the 2022 fiscal year indicates approximately 369,000 children in the U.S. welfare system. Through the California Child Welfare Indicators Project in collaboration with UC Berkeley and the California Department of Social Services, it is estimated that there are around 42,000 foster children and youths under 21 in California, with over 14,000 in Los Angeles County, placed in relative or stranger foster homes due to abuse, neglect, or abandonment.
Pellerin stated, “Foster family agencies play a critical role in caring for some of California’s most vulnerable children, and this proposal aims to ensure that FFAs do not cease operations due to losing liability insurance.”
“Unfortunately, the Nonprofit Insurance Alliance (NIA), which provided insurance for 90% of FFAs in California, announced that they will no longer renew policies for all FFAs in the state,” she said. “Guy Carpenter & Company LLC, the reinsurer for NIA based in Philadelphia, stated that if NIA continues to provide insurance for FFAs, they will no longer offer reinsurance to NIA.”
Pellerin urged all property and casualty insurance companies operating in California to quickly find ways to provide insurance to FFAs to help stabilize the state’s foster care system. She called the proposal a “temporary solution to keep foster children in their current homes,” moving foster families from FFAs that cease operations due to lack of insurance to those still operating, ensuring foster children do not lose their current placement status.
The proposal will authorize the California Department of Social Services, effective October 1 of this year or the date of enactment of the new provisions (whichever is later), to temporarily waive specific requirements in current law (e.g., exceptions for background check requirements) to expedite the transfer of approved resource families to counties or another FFA. This provision is set to expire on January 1, 2027.
AB2496 stipulates that FFAs may be held liable for damages or losses caused by negligence, but public entities (including their officers, employees, or volunteers) acting within their official capacities will not be held responsible for damages or losses. FFAs and public entities are required to bear the insurance costs for their respective actions and negligence, and are responsible for defending claims arising from these risks.
In some states, the issue of child foster care is overseen by state-level agencies; in California, each of the 58 counties has its own child foster care system. California law authorizes the government to remove children from homes where they are abused or neglected, with foster care being a joint effort between the government and private organizations who recruit and screen resource families. Foster families receive a monthly stipend. The challenge lies in the fact that nonprofit private foster care agencies need funding to operate, but they only receive compensation after children are placed, and in some states, private foster care agencies are for-profit companies.
After applying to a private foster care agency, the Martinez couple had three children (two girls and a boy under 8 years old) placed in their home in 2018. During the 70 days the children spent with the Martinez couple, it was revealed during family visits that Martinez had sexually abused them. He was sentenced to life imprisonment in December 2023.
In 2019, the three children sued Martinez and the Alternative Family Services company, which had selected the Martinez couple as foster parents. The plaintiffs’ attorneys attempted to reach a settlement with NIA, the insurance provider for the company, not exceeding $11 million, but NIA refused to settle.
Following the trial, the jury awarded $24.8 million in damages, with the Alternative Family Services company bearing 60% ($14.88 million), Martinez 35% ($8.68 million), and his wife 5% ($1.24 million) of the total.
According to an article from Open California’s Capitol Weekly published on Wednesday (the 18th), NIA contacted Pellerin in June and proposed drafting a bill to address unforeseen damages awarded by juries against FFAs for technical violations, threatening to cease insurance coverage for FFAs in California otherwise. This led to Pellerin introducing AB2496.
On August 21, NIA announced that they would no longer renew policies for FFAs in California or accept new ones. Pamela Davis, the president and CEO of the alliance, stated that their company was seeking either legislative action or exiting the FFA insurance market due to juries unfairly holding them accountable for unforeseen issues or errors at the county level. She claimed that when a licensed physician harms a patient, the California Medical Board does not bear responsibility.
Child welfare advocates believe that the insurance alliance is only looking out for their own interests and is trying to manufacture or exacerbate a crisis, citing the Martinez case as an isolated incident. Pellerin revised the bill once more and saw it passed by the legislature, aiming to keep California’s foster care system running in the short term. However, the risk of FFAs shutting down due to lack of insurance still looms, with higher premiums from other companies.
On September 9, Davis released another statement, asserting that a new version of AB2496 drafted by unknown parties is “worse than doing nothing” by significantly increasing risks for California FFAs. She warned that if FFA agencies assume any additional liabilities related to resource families as stipulated in AB2496, it would be considered a significant change in operations, giving NIA reason to immediately cancel their policies.
In essence, the insurance alliance’s stance is that AB2496 makes it more challenging for nonprofit foster family agencies to obtain insurance, and the alliance is taking action to negate any temporary benefits the bill might bring.
The Capitol Weekly article suggests that at best, AB2496 will provide a momentary respite for California’s FFAs until the next legislative session, at which point a more permanent solution must be found. Nevertheless, leaders from the California Alliance of Child and Family Services (CACFS) express concerns that foster family agencies may start closing down due to the inability to secure insurance.