An insurance cliff is coming for California's foster system. What that means for foster families and kids

California’s foster children may soon be at risk of being displaced from their current homes due to a looming insurance crisis.

Last month, Nonprofits Insurance Alliance of California (NIAC), which serves most foster family agencies in the state, announced it was sending out nonrenewal notices, letting plans expire starting in October.

Foster family agencies are nonprofits that contract with county child welfare departments to recruit, certify and train foster parents — and serve around 9,000 children in the state. Without liability insurance, they aren’t able to operate and support foster parents.

“The worst-case scenario is that the children end up in either a different environment or end up in a residential program where they don't necessarily need to be,” said Christine Stoner-Mertz, CEO of the California Alliance of Child and Family Services, which represents about 100 foster family agencies in the state. “That’s what we’re all trying to avoid.”

How did we get here? 

NIAC, which says it insures about 90% of the foster family agencies in the state, said recent trends they’ve seen in litigation have become too costly.

In December of last year, a Sonoma County jury awarded $25 million to three children who were sexually abused by their foster parent. According to The Press Democrat, attorneys for the victims argued that a foster agency hadn’t properly vetted that foster parent. The jury ruled the agency responsible for 60% of damages.

An attorney for the agency has maintained there weren’t any red flags raised in the vetting process.

“It’s kind of the match that lit this whole pile of kindling,” said Pamela Davis, NIAC’s CEO. She said they’d been paying out other settlements where they believed the nonprofits weren’t at fault. “It became unsustainable.”

She said about half of the insurance policies for the 143 foster family agencies they provide insurance to will expire by the end of the year, and the rest will expire in July 2025.

Who is affected? 

About 9,000 children in the state are served through foster family agencies. Many of them have higher needs, like for mental health support.

In L.A. County, about 1,800 children are placed with parents through these nonprofits, and about 500-600 could be affected within the next two months, according to county officials.

What can happen long-term? 

While foster family agencies are scrambling to find solutions — by trying to secure alternate insurance, or preparing to transfer families to the remaining insured agencies or to the county — advocates fear children might have few places to go if those plans don’t pan out.

“We already struggle with kids in unlicensed settings, and we don't want more kids in unlicensed settings or shelters or anything like that,” said Stoner-Mertz.

An investigation last year by the Investigative Reporting Program at UC Berkeley and L.A. Times found hundreds of children were placed in hotels due to the shortage of foster homes.

“The impact of such a loss would be devastating to hundreds of children who could be displaced and to jurisdictions across the state which continue to face challenges in finding adequate care for young people with acute behavioral needs,” L.A. County’s Department of Children and Family Services said in a statement.

Who is trying to problem-solve?

• Last week, the L.A. County Board of Supervisors passed a motion for officials to report back in 15 days about possible solutions.
• The governor signed a bill aimed at easing the process of transferring foster families to another agency or to the county in light of the crisis.
• California’s insurance commissioner’s urged other insurance companies to offer their business to foster family agencies.