The Children’s Bureau, a division of the US Department of Health and Human Services, reports that for the period from October 1, 2009 through September 30, 2010, there were 436,321 substantiated cases of child abuse and/or neglect. Of that number approximately 25% were categorized as physical or sexual abuse. That’s based on reported cases and does not contemplate incidents that were unreported. While any system attempting to codify child abuse is flawed for a variety of reasons, the number of abuse cases is staggering and has not gone unnoticed by law firms and others.
Recently one of the National Underwriter sites posted a column regarding the Penn State sexual abuse scandal and which insurance coverage(s) may or may not apply. It appears the author is starting with the GL policy and will at some point address D&O and possibly EPL issues. http://www.propertycasualty360.com/2012/04/26/penn-state-vs-insurer-who-will-cover-sex-abuse-co
I have no idea what the insurance package for PSU includes, but I would certainly hope they have separate coverage or at least an additional coverage part that specifically addresses sexual abuse/molestation. I would expect to find that in an EPL policy written for the school. I’m guessing if they didn’t have that coverage in place previously they have it now, albeit at a greatly increased premium.
This particular scenario and the fact that it’s gained national attention is probably not something your client’s think can or will happen to them, but it doesn’t have to be a national scandal to ruin your customer’s business. All you need is a little local press concerning the alleged improper/illegal conduct of a private school, daycare center, assisted living facility or any of a hundred other possible entities who have responsibility for the safe keeping of others. Add to that the cost of defending the allegations and even if they’re exonerated they may not be able to recover their lost revenue.
In this day and age, it would seem that offering your client coverage for sexual abuse and molestation would automatically be on the checklist of things “to do”, even if it’s only a sub limit if that’s all you can find. For some classes and types of risks, I’ll admit it’s not an easy write and can be expensive, but if you don’t pursue it your client may end up paying costs out of pocket, and you may be filing an E&O claim. Neither situation is desirable.
Penn State will obviously live on, and it should, as the actions or lack thereof from a few people should not destroy an institution for all time. Your customers probably don’t have the staying power and resources of a major university, so at the very least they need a fighting chance to survive what could be a very damaging series of events.