Small Nonprofit Agencies Tell of Insurance Dilemma

The insurance industry has virtually turned its back on protecting community-service agencies, preschools run by parents and Headstart educational programs aimed at helping needy children, a panel of California insurance regulators was told Wednesday.

The state Department of Insurance concluded the second of two hearings into the availability of liability insurance for specific professions. Although Wednesday’s hearing focused on private schools and churches, the panel also welcomed testimony offered by Michael P. Checca, vice president of LFC Insurance, Los Angeles.

Because of the difficulty of obtaining liability protection, Checca said, the YMCA in Los Angeles has formed its own insurance operation. But, he added, smaller nonprofit service organizations lack the resources to set up a similar “captive” insurance agency. And operators of Headstart programs can obtain insurance only at a virtually prohibitive annual rate of $75 to $90 a child, he said.

John Faber, deputy insurance commissioner and chief counsel, suggested that nonprofit agencies band together to seek legislation to limit their liability to economic damages. This sort of thing was done, to some extent, under Proposition 51, the initiative adopted by the voters last November to limit municipalities’ liability for such non-economic damages as “pain and suffering.”

Faber and the three other hearing panelists, led by Everett M. Brookhart, director of the Department of Insurance’s consumer affairs division, were also told that insurance remains scarce and costly for private schools in general and for many churches. However, insurers are beginning to venture into the market once again, according to surveys made for the department by the Independent Insurance Agents and Brokers of California.

Nonetheless, premiums for even well-established and relatively low-risk private schools range from 200% to 400% higher today than they were in 1984, the association found.

Wayne Hall, a Torrance insurance broker who presented the surveys’ findings, cautioned, however, that it is difficult to generalize about private schools because they are so diverse. “The skill of underwriting this line (of insurance) requires considerable talent of agents and insurers alike,” Hall said. “As a result there are relatively few agencies and insurers involved in providing liability insurance for private schools.”