Day-Care Operators Laud Insurance Plan, but Want Lower Rates

Child care providers in the San Fernando Valley say they welcome insurance industry efforts to help them obtain liability coverage, but are more concerned about skyrocketing premiums.

The industry effort “will help those turned down for insurance,” said Dorothy Beltz, who runs a day-care home in her Canoga Park residence. “But we want lower rates.”

Under a program announced Thursday in Sacramento, day-care providers who have been denied liability insurance may apply to a group of 26 insurance carriers under the banner of “Cal-Care.”

Day-care providers rejected by two or more insurance carriers may apply to Cal-Care, which plans to distribute insurance applications among member firms. If the applications are rejected again, a group of insurance industry officials and a representative of day-care providers will try to pinpoint what operational changes a provider can make in order to secure coverage.

However, Joe Annotti, spokesman for the Independent Insurance Agents and Brokers of California, said that, although the program should make coverage available to more day-care centers, it may bring about only minor rate reductions and does not guarantee that insurance will be available.

Publicity Spurred Increase

According to insurance carriers, publicity about child molestation cases, chiefly the McMartin Pre-School case in Manhattan Beach, and a rising number of claims have triggered the increase in premiums, which typically have jumped by 300% to 500% since spring.

The situation has prompted some companies to stop insuring day-care centers, forcing many providers to look elsewhere for coverage, often with tighter eligibility requirements.

The problem became so acute that it came to the attention of the Legislature in the session that adjourned in September. Cal-Care was organized by the insurance industry to head off proposed legislation that would have required insurance companies to offer liability coverage and given state officials authority to set rates.

Marjorie Morris, executive director of a referral service called Child Care Resource Center of the San Fernando Valley, said that day-care providers are hoping the Cal-Care plan will decrease rates “because they still don’t believe insurance companies have the evidence to back the (higher) rates.”

“Right now, I feel like somebody is holding a gun to my head and is going to rob me,” said Bob Hulton, founder of Kidsville USA in Northridge, which provides day care for about 60 children.

Even with the addition of a clause excluding coverage of child molestation cases, Kidsville USA was told recently that comparable annual liability and building premiums would jump from $1,540 to $8,187, he said.

Will Consider Program

Hulton said that his policy expires Saturday and that he will consider the private industry program as an option.

Beltz, who cares for four children in her home, said she had considered dropping out of the day-care business because of soaring liability rates. She said her annual premium has increased from $117 for $500,000 in coverage to about $480 for $300,000 in coverage.

Child care providers will demand insurance reform when the state Legislature reconvenes in January if Cal-Care doesn’t bring down rates, said the resource center’s Morris.

She said providers may also seek better protection for day-care homes by raising the maximum that insurance carriers must, by law, pay in liability claims. The Legislature this year established a $100,000 limit for each claim, up to $300,000 in a year.

“Everybody’s kind of holding his breath until January, hoping that more legislation won’t be required,” Morris said.