Abuse and Molestation: There's Insurance Coverage For That?
It turns out there is insurance coverage for sexual abuse and molestation.
This was brought to our attention by last week's Daily News article that claimed that in the wake of so many recent sex abuse scandals, the city is requiring all contractors who come into contact with youth to carry abuse and molestation insurance coverage so that insurance companies would carry the cost of abuse claims rather than taxpayers. But that's only partially true.
It's only the New York City Housing Authority that requires the coverage, which receives federal not local funding. We asked NYCHA about this and we received this reply...
The New York City Housing Authority requires General Liability Insurance with the addition of Abuse and Molestation insurance for sporting events, recreation and educational services; Community Operations' human services (organizations providing services to special populations, such as people with diminished capacity and/or mobility; infants, toddlers, preschoolers, and seniors, among others), and transportation services. Sponsors, vendors, or licensees who provide services for or work with various populations present a potential exposure. The requirement for General Liability insurance has been in existence for at least 15 years. The additional requirements for abuse and molestation insurance for specific types of occupancy came about as a result of NYCHA reviewing its exposures in 2005. The requirement is due to a review of operational exposures that NYCHA considers pertinent to its contractual agreements, the type of work, or occupancy of our premises.
The Daily News focused on the financial impact paying for this coverage will have on programs like Cops For Kids, but we couldn't help but wondered where this idea of paying to insure against molestation came from.
We spoke with Timothy Lytton, a professor at Albany Law School who has conducted research on insurance laws and wrote the 2008 book Holding Bishops Accountable: How Lawsuits Helped the Catholic Church Confront Clergy Sexual Abuse.
"Policies of child protection have been largely due to insurance coverage," said Lytton. "Because of the many steps businesses have to go through in order to be eligible for insurance coverage, in this case, for example, stricter background checks of employees working with children, the insurance company is providing greater regulation. Insurance companies are helping to regulate child abuse and molestation not the NYPD or through individual litigation."
Abuse and molestation insurance coverage was birthed in the early 1980's after major sex abuse scandals from the Catholic church brought public attention to an issue that had remained relatively private before then.
"In the early to mid 1980's no one anticipated claims of sexual misconduct would be brought against entities rather than individual perpetrators," Cathy Sugayan, a lawyer based out of Chicago who provides counsel for risk management cases, tells the Voice.
After several major cases, including James Porter -- a Catholic priest accused of molesting over 28 children who later confessed to abusing nearly 100 children over a period of 30 years -- insurers were left paying out victims through the Catholic church's general liability insurance coverage. Insurance companies took a major loss and nationally reformed their policies for liability insurance to exclude sexual misconduct. For nearly a decade there was no coverage for entities such as churches, municipalities or universities for such incidents.
It wasn't until the early 90's when insurers, after seeing the potential revenue, began to create claims based coverage for incidences of sexual misconduct. Companies could collect when an employee was found guilty of abuse, and could then pay a victim restitution.
According to Sugayan, companies pay pretty steep premiums for this kind of coverage, face intense scrutiny by their insurer, and sometimes have to pay a large deductible (occasionally up to $1 million).
If some companies are paying up to protect themselves, we placed calls to several child advocacy centers in the city to get their take on the issue, but interestingly most of them had never heard of it.
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