BILL ANALYSIS �
AB 863
Page 1
Date of Hearing: April 5, 2011
ASSEMBLY COMMITTEE ON HUMAN SERVICES
Jim Beall Jr., Chair
AB 863 (Bonilla) - As Introduced: February 17, 2011
SUBJECT : Foster care: insurance
SUMMARY : Limits the Foster Family Home and Small Family Home
Insurance Fund liability exclusions to only those criminal or
intentional acts committed by a foster parent.
EXISTING LAW
1)Establishes the Foster Family Homes and Small Family Home
Insurance Fund (the Fund), administered by the Department of
Social Services (DSS) to pay for damages to foster children,
their parents or guardians, on behalf of foster family homes
and small family homes, that result from claims related to the
provision of foster care services. Article 2.5 Health and
Safety Code (HSC) Sections 1527-1527.8.
2)Requires the Fund to pay for all valid claims of bodily or
personal injury that result from the activities of the foster
parent(s) during the time which the child lived in the foster
family home. HSC 1527.5.
3)Defines "foster parent" for the purposes of the Fund as the
person, along with his or her spouse, providing care to a
foster child placed in a licensed foster family home. HSC
1527.
4)Exempts the Fund from liability as follows:
a) Any loss resulting from a dishonest, fraudulent,
criminal or intentional act;
b) Any occurrence unrelated to the foster care
relationship;
c) Bodily injury cases involving a motor vehicle,
aircraft or watercraft owned or operated by the foster
parent;
d) Losses resulting from licentious, immoral, or sexual
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behavior committed by a foster parent intended to lead
to, or culminating in, a sexual act;
e) Any allegation of alienation of affection against a
foster parent;
f) Any loss or damage for an occurrence prior to
October 1, 1986;
g) Exemplary damages; and
h) Any liability resulting from the failure on the part
of the foster parent to obtain insurance pursuant to
Section 676.2 of the Insurance Code. HSC 1527.3.
1)Limits the liability of the fund to $300,000 for any single
foster family home for total claims filed in a single calendar
year. HSC 1527.4.
2)Provides that homeowner's or tenant's insurance may not be
cancelled or denied based solely on the policyholder or
applicant's operation of a licensed foster family home or
small family home. Insurance Code (INS) Section 676.7 (a).
3)States that it is against public policy for a homeowner's or
tenant's insurance policy to provide liability coverage for
claims payable through the Fund. INS 676.7 (c).
FISCAL EFFECT : Unknown
COMMENTS :
Background: The Fund was created by the Legislature in 1986 to
provide gap liability coverage to licensed foster family homes
and small family homes. Prior to the creation of the Fund,
licensed foster family home operators cited they were routinely
denied homeowner's and other types of insurance based on their
status as foster parents, or related activities. The Fund,
along with companion changes in policy governing insurance
coverage (INS 676.7), allowed foster family homes
indemnification for liability incurred during the course of
providing related services. This effort was aimed at ensuring
the state could recruit and retain qualified foster family
providers.
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Once licensed, a foster family home is covered by the Fund for
claims totaling up to $300,000 in a single year for valid claims
submitted by foster children or their parents or guardians that
occur as a result of the activities of the foster parent, while
the child resides in the home. The original $300,000 cap was
enacted in 1986 and has not changed in the over twenty years
since. According to DSS, in fiscal year 2008/2009, there were
22 new claims submitted to the Fund, of which $346,999 were paid
in claim settlements. In 2009/2010 there was a balance of
$5,391,000 in unspent funds, although the current Fund balance
is at $2,391,000. The Fund averages 30-35 claim requests per
year.
Following the Fund's creation in 1986, DSS issued an All County
Letter (ACL No. 86-102) providing guidance to county welfare
directors in which the department stated regarding applicable
exclusions: "In addition, certain acts are not covered, such as
losses arising out of a criminal act on the part of the foster
parent or bodily injury arising out of the operation or use of a
motor vehicle, aircraft or watercraft." �Emphasis added.]
The statutory language creating the Fund lists several
exclusions, including, "any loss arising out of a dishonest,
fraudulent, criminal, or intentional act." This bill would
narrow the existing exclusions by clarifying that those criminal
or intentional acts must be committed by the foster parent,
consistent with exclusions enumerated in (c), (d), (e) and (h).
This change would result in a requirement that the Fund pay
damages for claims arising out of injury to foster children as a
result of intentional or criminal acts committed by third
parties.
Need for this bill: According to the author:
�This bill] seeks to encourage foster parenting by
clarifying the foster care gap insurance. A recent
court decision found foster parents liable for
intentional and criminal bad acts by third parties.
The impact from the court's ruling has made it harder
for the state to recruit and retain safe and stable
foster parents. AB 863 is aimed at ensuring the
state's ability to maintain qualified foster family
providers. This new ruling means that a foster
parent's personal property and assets are liable if a
situation arises out of their control. For example,
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if a foster parent hires a babysitter (a third party)
and the babysitter intentionally hurts the foster
child, the foster parent is ineligible for �the
Fund's] gap insurance coverage.
Brandon S. v. The State of California: This bill seeks to amend
existing law following an Appeals Court ruling which upheld the
lower court's decision for the defendant in the case of Brandon
S. v. The State of California ex rel. Foster Family Home and
Small Family Home Insurance Fund ((2009) 174 Cal.App.4th 815).
The case concerned a foster child who was sexually abused by the
minor stepson of his licensed foster parent. The child, Brandon
S., filed a claim with the Fund seeking damages for emotional
and physical injuries, but because the stepson admitted to the
molestation charge, Brandon's claim was denied on the basis that
all criminal and intentional acts are excluded from coverage in
statute.
Judge Willhite, wrote in the majority opinion for the Brandon S.
case, "Although legitimate policy questions are raised by the
legislative decision to exclude coverage for a claim like
Brandon's, we decline to rewrite the statutory language and
depart from governing principles of statutory construction to
reach the result Brandon seeks. That is a task for the
Legislature."
This bill is substantially similar to AB 2206 (Hill), 2010,
which was held on the Assembly Appropriations suspense file. In
July 2010, Assembly Member Hill requested an audit to focus on
the administration of the Fund and to assess the feasibility of
expanding the Fund's coverage to Foster Family Agencies as well
as the Kinship Guardian Assistance Payment program. The
California Bureau of State Audits anticipates completion of the
audit in June of 2011.
Arguments in Support: The sponsor of this bill, the Children's
Advocacy Institute, writes:
As a matter of sound policy, we do not offer insurance
coverage to an insured that will pay for the damages
caused by the insured's intentionally criminal
acts?The omission of "foster parent" in subsection (a)
has been interpreted by the court system to mean that
the fund is not liable for any dishonest, fraudulent,
criminal or intentional act perpetrated by anyone
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against the foster child.
This new ruling means that a foster parent's personal
property and assets are liable if a situation arises
out of their control. For example, if a foster parent
hires a babysitter (a third party) and the babysitter
intentionally hurts the foster child, the foster
parent is ineligible for gap insurance coverage.
Their assets are now exposed, contrary to the intent
of the law and the intent of everyone when the law was
enacted in 1986.
The California Alliance for Child and Family Services writes in
support of this bill,
In an inadvertent oversight, the statute is missing the
word "foster parent" in subsection (a) of Health and Safety
Code 1527.3, leading to a recent court interpretation in
"Brandon S. v. The State of California ex rel Foster Family
Home and Small Family Home Insurance Fund" where the court
ruled that the state insurance liability fund is not
available to cover the liability of a foster parent even
when the foster parent is innocent of any wrongdoing
because the negligence was committed by a third party.
If not remedied, the recent interpretation of this court's
will have a serious negative impact on the ability of the
State and counties to recruit qualified and caring foster
parents.
Question: Should the state pay claims to foster children or
their parents on behalf of foster parents for dishonest,
fraudulent, criminal or intentional acts committed by a third
party?
Consistent with insurance practices, this bill would not cover
damages related to the criminal or intentional acts of the
"insured," in this case, the foster parent. As a matter of
public policy, it would seem appropriate to compensate the
state's foster children for injuries suffered, either due to an
accident or criminal or intentional act of a third party while
in the state's care.
Prior and Related Legislation:
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AB 2206 (Hill) 2010 was substantially similar to this bill and
held on the Assembly Appropriations Committee suspense file.
SB 706 (Florez) 2004 was a DSS-sponsored bill that would have
narrowed the scope of the Fund and would have, among other
provisions, specified that losses arising from criminal,
intentional or fraudulent acts by a foster parent or a person
residing in the home were excluded from liability, even if there
was a related allegation of negligence. This bill died in the
Assembly Judiciary Committee without a hearing.
AB 1467 (Alby) of 1997 clarified the scope of coverage of the
fund by, among other things, including members of the foster
parent's household under the exclusion of liability for Fund for
immoral or sexual behavior. This bill passed the Assembly with
overwhelming support, but died after it was not heard in Senate
Health and Human Services Committee.
SB 470 (Royce) Chapter 195, Statutes of 1988 removed the sunset
date, allowing for continuation of the Fund.
SB 1159 (Royce) Chapter 1330, Statutes of 1986 established the
Fund.
REGISTERED SUPPORT / OPPOSITION :
Support
Aspiranet
California Alliance of Child and Family Services
AB 863
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Opposition
None on file.
Analysis Prepared by : Michelle Doty Cabrera / HUM. S. / (916)
319-2089