BILL ANALYSIS Ó SENATE JUDICIARY COMMITTEE Senator Noreen Evans, Chair 2011-2012 Regular Session AB 2019 (Hill) As Amended April 18, 2012 Hearing Date: June 26, 2012 Fiscal: Yes Urgency: No RD SUBJECT Foster Family Home and Small Family Home Insurance Fund DESCRIPTION Existing law requires that the State Department of Social Services (DSS), or its designated agency, approve or reject a claim made against the Foster Family Home and Small Family Home Insurance Fund (Fund) within 180 days after it is presented. This bill would require DSS or its designated agency, as specified, to notify the claimant of the decision to reject or approve a claim within 15 days of the decision, and would provide that the applicable statute of limitations for the underlying claim would toll (be suspended) from the date the claim against the Fund has been filed until the date the department or designated agency, as specified, has notified the person that the department has either rejected or approved the claim. Existing law also prohibits specified insurance carriers from failing or refusing to accept an application for that insurance or to issue that insurance to an applicant or canceling that insurance, solely on the basis that the applicant or policyholder is engaged in foster home activities in a licensed foster family home or licensed small family home, as defined. This bill would expand this protection to applicants or policyholders engaged in foster home activities in certified family homes, as specified. The bill would also make other technical, non-substantive changes. (more) AB 2019 (Hill) Page 2 of ? BACKGROUND In 1986, the Legislature passed SB 1159 (Royce, Ch. 1330, Stats. 1986) to establish the Foster Family Home and Small Family Home Insurance Fund (Fund) and prohibit insurance carriers from rejecting any applicant or policyholder solely on the basis that they are foster parents, as specified under law, in response to the growing insurance crisis in the state's foster cares system. (See also Sen. Rules Com., Analysis of SB 1159 (1985-1986 Reg. Session) as amended Aug. 28, 1986.) Foster parents were reportedly becoming increasingly aware that their home owners insurance provided for limited insurance coverage, if any, for claims arising from caring for foster children. SB 1159 recognized that the need for foster family and small family home liability insurance had increased significantly over the years because the profile of the foster child had changed so much (from those that were not properly loathed, fed or had access to sanitation facilities, to those who were victims of child abuse, sexual abuse, and psychological abuse, as well as severely neglected and abandoned) and the social atmosphere had become increasingly litigious, on top of which such insurance was not available. The Fund is designed to pay claims that foster children, or their parents, guardians, or guardians ad litem file for damages arising out of specified occurrences related to the foster care relationship and the provision of foster care services. The liability of the Fund is capped at $300,000 for any single foster family home or small family home for all claims arising due to one or more occurrences during a single calendar year. The types of occurrences covered are those accidents, as specified, which result in bodily injury or personal injury neither expected nor intended by the foster parent, and losses arising out of certain acts are statutorily excluded from recovery. Notably, not all foster family homes are covered by the Fund: only foster family homes and small family homes licensed by the Department of Social Services (DSS) or by a county under contract with DSS are currently eligible for coverage from the Fund. (See Health & Saf. Code Sec. 1527 et seq.) Significant to this bill, under California law, a person who intends to bring a civil action against a foster parent insured by the Fund, or against the Fund, must first file a claim against the Fund as a precondition to bringing a civil action. A civil action may be brought only after the claim is rejected AB 2019 (Hill) Page 3 of ? or is filed, approved and paid, and the person claims damages in excess of the payment. (Health & Saf. Code Sec. 1527.6(d).) California law further mandates that the DSS, or its designated agency (currently the Department of General Services (DGS)) approve or reject a claim made against the Fund within 180 days after it is presented. A recent report by the Bureau of State Audits indicates that not all claims were decided in that mandated timeframe. (See California State Auditor, Foster Family Home and Small Home Insurance Fund: Expanding its Coverage will Increase Costs and the Department of Social Service Needs to Improve its Management of the Insurance Fund, September 2011 Report 2010-121.) The interplay of these two provisions, at times further aggravated by the failure of DSS to ensure compliance with that 180 day timeframe, has seemingly led to instances in which cases have been dismissed for the running of the applicable statute of limitations to bring a civil action for the underlying claim. Moreover, nothing in existing law specifies the time frame in which the decision rendered must be relayed to the claimant. This bill would require that the claimant be notified of the decision to reject or approve a claim within 15 days by DSS or its designated agency, and would otherwise provide that the applicable statute of limitations for the underlying claim would toll from the date the claim against the fund has been filed until the date the department or designated agency, as specified, has notified the person that the department has either rejected or approved the claim. Additionally, existing law under the California Insurance Code prohibits specified insurance carriers from failing or refusing to accept an application for that insurance or to issue that insurance to an applicant or canceling that insurance, solely on the basis that the applicant or policyholder is engaged in foster home activities in a licensed foster family home or licensed small family home, as defined. This bill would expand this protection to applicants or policyholders engaged in foster home activities in certified family homes, as specified. CHANGES TO EXISTING LAW 1.Existing law establishes the Foster Family Home and Small Family Home Insurance Fund to pay, on behalf of foster family homes and small family homes, as defined, claims of foster children, their parents, guardians, or guardians ad litem resulting from occurrences peculiar to the foster-care AB 2019 (Hill) Page 4 of ? relationship and the provision of foster-care services. Existing law provides that the fund may sue and be sued. (Health & Saf. Code Sec. 1527.1.) Existing law provides that a foster family home is a residential facility providing 24-hour care for six or fewer foster children that is the residence of the foster parent. Existing law similarly defines small family home, except that the foster children have mental disorders or development or physical disabilities requiring special care and supervision. (Health & Saf. Code Sec. 1502(a)(5)-(6).) Existing law provides that the Fund is not liable for specified damages or acts, including, among other things, any loss arising out of a dishonest, fraudulent, criminal, or intentional act. (Health & Saf. Code Sec. 1527.3.) Existing law requires that any claim against the fund be filed with the Fund in accordance with claims procedures and on forms prescribed by the Department of Social Services (DSS) or its designated contract agency, and that any claim against the Fund filed by a foster parent or a third party be submitted to the Fund within the applicable period of limitations for the appropriate civil action underlying the claim, as specified. Existing law provides that if a claim is not submitted to the Fund within the applicable time, there shall be no recourse against the fund. (Health & Saf. Code Sec. 1527.6(a)-(b).) Existing law requires DSS approve or reject a claim within 180 days after it is presented. Existing law provides that no person may bring a civil action against a foster parent for which the Fund is liable unless that person has first filed a claim against the Fund and the claim has been rejected, or the claim has been filed, approved, and paid, and damages in excess of the payment are claimed. (Health & Saf. Code Sec. 1527.6(c)-(d).) Existing law mandates that all processing of decisions and reports, payment of claims, and other administrative actions relating to the fund be conducted by the DSS or its designated contract agency. (Health & Saf. Code Sec. 1527.7.) Existing law states the legislative intent to maintain the Fund at an adequate level to meet anticipated liabilities. (Health & Saf. Code Sec. 1527.8.) Existing law provides that if a person entitled to bring an AB 2019 (Hill) Page 5 of ? action other than for the recovery of real property, as specified, is, at the time the cause of action accrued either under the age of majority or insane, the time of the disability is not part of the time limited for the commencement of the action. Existing law provides that such tolling of the statute of limitations does not apply to causes of actions against a public entity or public employee for which a claim is required to be presented in accordance with specified sections of law. (Code Civ. Proc. Sec. 352.) Existing case law provides that there was no such exception in the tolling statute for an action involving a claim against the Fund pursuant to the Health and Safety Code. (See e.g. Rodriguez v. L.A. County Superior Court (2003) 108 Cal.App.4th 301, 308.) Existing law requires that an action for assault, battery, or injury to, or for the death of, an individual caused by the wrongful act or neglect of another, be brought within two years. (Code Civ. Proc. Sec. 335.) This bill would amend the above to require that the Legislature maintain the Fund at an adequate level to meet anticipated liabilities. This bill would require DSS or its designated agency, as specified, to notify the claimant of the decision to reject or approve a claim within 15 days of the decision. This bill would provide that the applicable statute of limitations for the underlying claim would toll from the date the claim against the fund has been filed until the date the department or designated agency, as specified, has notified the person that the department has either rejected or approved the claim. 2.Existing law prohibits an admitted insurer, licensed to issue and issuing homeowner's or tenant's policies, as described, from (1) failing or refusing to accept an application for that insurance or to issue that insurance to an applicant or (2) canceling that insurance, solely on the basis that the applicant or policyholder is engaged in foster home activities in a licensed foster family home or licensed small family home, as defined. (Ins. Code Sec. 676.7(a).) This bill would expand the above protection to applicants or policyholders engaged in foster home activities in certified AB 2019 (Hill) Page 6 of ? family homes, as specified. This bill would make other technical, non-substantive changes. COMMENT 1. Stated need for the bill According to the author: The laws governing the Fund's coverage have not been revisited since 1986, yet there have been many changes in the foster care system. In 1986, about 86 Ýpercent] of foster children were in homes licensed by the state or counties and 14 Ýpercent] were in homes certified by Foster Family Agencies ÝFFA]. Today, nearly half of children in foster care are placed a certified home. These homes should have the same protections as those afforded to licensed foster homes-this means not having to worry about being denied insurance coverage for being a foster parent. This protection is especially important, given the outcome of Garcia v. W&W Community Development. In this case, the court made it very clear that FFAs are not responsible or liable for certified homes. Absent coverage by the Fund, the state should make it as easy as possible for certified foster parents to be able to buy insurance coverage to protect their resources. Also, by extending the statute of limitations for claims that go through the Fund, this bill takes an important step in ensuring that any child that is harmed while in foster care has the same right to due process as anyone else. 2. Tolling of the statute of limitations once claim is made, until notice given of decision Existing law requires that any claim against the Fund filed by a foster parent or a third party be submitted to the Fund within the applicable period of limitations for the appropriate civil action underlying the claim, as specified. If a claim is not submitted to the Fund within the applicable time, there is no recourse against the fund. California law also mandates that the Department of Social Services (DSS), or its designated agency (i.e. Department of General Services (DGS)) approve or reject a claim within 180 days after it is presented, while also prohibiting a civil action from being brought against a foster parent for which the Fund is liable unless that person has first AB 2019 (Hill) Page 7 of ? filed a claim against the Fund and the claim has been rejected, or the claim has been filed, approved, and paid, and damages in excess of the payment are claimed. This bill would require that the claimant be notified of the decision to reject or approve a claim within 15 days by DSS or its designated agency, and would otherwise provide that the applicable statute of limitations for the underlying claim would toll from the date the claim against the Fund has been filed until the date the department or designated agency, as specified, has notified the person that the department has either rejected or approved the claim. a. Statute of limitations, generally A statute of limitation is a requirement to commence legal proceedings (either civil or criminal) within a specific period of time. Statutes of limitations are tailored to the cause of action at issue - for example, cases involving injury must be brought within two years from the date of injury, whereas cases relating to written contracts must be brought within four years from the date that the contract was broken. Although it may appear unfair to bar actions after the statute of limitations has elapsed, that limitations period serves important policy goals that help to preserve both the integrity of our legal system and the due process rights of individuals. Generally, statutes of limitations are deadlines created for consistency for both plaintiffs and defendants. Plaintiffs must utilize due diligence in discovering facts giving rise to their claims and thereafter file actions on these claims within the time specified by statute. These deadlines function to prevent the assertion of stale claims and, ultimately, "to promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence is lost, memories have faded, and witnesses have disappeared." (3 Witkin Cal. Proc. Actions Sec. 433.) Limitations periods promote finality by encouraging an individual who has been wronged to bring an action sooner rather than later - timely actions arguably ensure that the greatest amount of evidence is available to all parties. It should be noted that this bill would not provide for an alternate statute of limitations for the types of claims that may be made against the Fund, but instead provides for the tolling of the current statute during the time in which the claim is being reviewed by DSS or its contracting agency, DGS. AB 2019 (Hill) Page 8 of ? b. Need to toll the statute of limitations while claims against the Fund are decided This bill seeks to ensure that the statute of limitations does not run while waiting for a response from DGS. Proponents argue that lack of follow though with the 180 day statutory deadline to make a decision on a claim filed against the Fund, coupled with a lack of notice of the decision to the claimant, as well as the prohibition against the filing of a civil action until a claim against the Fund is made and decided, as specified, can impact a claimant's ability to seek legal recourse. A Bureau of State Audits report (Report) found that DGS took between 182 and 415 days to approve or reject 16 of the 118 claims between July 1, 2005 and December 31, 2010 that were reviewed, due in part to inconsistencies in the claims process. This was despite the fact that DGS had a process called "procedural rejections" in place, wherein DGS would reject any claim that has not been approved or rejected by the statutory 180 deadline, even if the investigation to determine if the Fund is liable has not be completed. The Report specifically recognized that DGS' failure to do so had the effect of "delaying the claimant's ability to seek judicial remedy through litigation" in at least one instance. (See California State Auditor, Foster Family Home and Small Home Insurance Fund: Expanding its Coverage will Increase Costs and the Department of Social Service Needs to Improve its Management of the Insurance Fund, September 2011 Report 2010-121, p. 2.) Staff notes, however, that the statute of limitations may run during the time in which DGS is investigating and making its decision, even if DGS were to make its decision consistently on the 179th day or even earlier, given the requirement that a claimant not file a civil claim until the Fund is made and decided. Generally, a statute of limitations commences running upon the happening of an event providing notice to claimants that a cause of action has accrued. This bill seeks to help ameliorate the situation wherein a party could run past the applicable statute of limitation to bring a civil action for the injury allegedly suffered, while awaiting the decision on their claim against the Fund. It would do so by first AB 2019 (Hill) Page 9 of ? requiring that notice be provided within 15 days of the decision being made, and also providing that the applicable statute of limitations be tolled from the time the claim is filed to the date that notice is provided to the litigant of the decision. In other words, if a claim is filed with the Fund with one day left on the two-year statute of limitations to file an action for personal injury caused by the negligent act of the foster parent in the provision of foster care services, the clock would freeze at the time of the filing, and only upon notice to the claimant as to whether their claim is rejected or accepted, would the clock unfreeze and commence, leaving the claimant one day to file their action in court if their claim was rejected or approved. Importantly, the clock would not be reset. Under existing law, various circumstances can toll a statute of limitations. For example, it can be tolled when one of the parties is under a legal disability-the lack of legal capacity to do an act-at the time the cause of action accrues. (See e.g. Code Civ. Proc. Secs. 340.6 and 352(a).) With respect to the foster children, their claims can toll under existing law until they reach the age of majority, with respect to actions other than for the recovery of real property. (Code Civ. Proc. Sec. 352; see Rodriguez v. L.A. County Superior Court (2003) 108 Cal.App.4th 301, 308 which provides that there was no such exception to this tolling statute for an action involving a claim against the Fund pursuant to the Health and Safety Code.) At the same time, they, their parents or their guardians must file a claim against the Fund within the applicable statute of limitations for bringing an action for the underlying claim. Moreover, they are prohibited from bringing a civil action until certain preconditions are met-namely, a claim must be filed against the Fund and a decision must be rendered either rejecting the claim or is filed, approved, and paid, but damages in excess of the payment are claimed. This is not dissimilar to the equitable tolling of the statute of limitations that courts have applied when a party must, as a precondition to bringing suit, have exhausted all of their administrative remedies. As a matter of public policy, it appears reasonable to allow for the tolling of the statute in this manner, given that the law ties the hands of the injured party in restricting their remedies first to the Fund, upon which DGS can legally take up to 180 days to review the injured parties case and there is presumably nothing that the injured party can do to expedite AB 2019 (Hill) Page 10 of ? the review of his or her claim in order to ensure that he or she brings a claim before the applicable statute of limitations on the underlying action runs. This arguably strikes a balance between the interest of the parties against whom the claim might be filed, and the party seeking remedy for the injury suffered is following the procedures by which the law requires them to act. Moreover, this bill would not affect the requirement that the claim be filed again the Fund within the applicable statute of limitations period. 1.Expansion of the current prohibition against the discriminatory denial or termination of insurance to those who are foster parents in certified foster homes This bill would apply the current prohibition on discrimination by insurance carriers against applicants and policyholders solely on the basis that the applicant or policyholder is engaged in foster home activities in a licensed foster family home or licensed small family home, as defined. This bill would expand this protection to applicants or policyholders engaged in foster home activities in certified family homes, as specified. In support, Aspiranet points out that this part of the bill "reflects changes that have occurred in the foster care system since this section of the insurance code was first put into law in 1986." Specifically, at the time that the Legislature first discovered that foster parents were unable to obtain homeowner or tenant's insurance coverage and passed legislation to prohibit discrimination against foster parents by insurance carriers, solely based on their status as a foster parent in licensed homes, Aspiranet points out that the vast majority of foster homes were directly operated under county or state supervision. In contrast, it notes that in the 25 years since, the landscape has changed such that the percentage of those in homes operated under licensure by private non-profit agencies has risen substantially. In the Bureau of State Audits report, the state auditor indicated that DSS data indicates that the State has 11,754 state- or county-licensed homes, with 9,222 foster children placed in them as of the first half of 2011. In comparison, the data indicated that there were 8,065 certified homes, 17,614 foster children. (See California State Auditor, Foster Family Home and Small Home Insurance Fund: Expanding its Coverage will Increase Costs and the Department of Social Service Needs to Improve its Management of the Insurance Fund, September 2011 AB 2019 (Hill) Page 11 of ? Report 2010-121, p. 5.) Importantly, this bill does not expand the Fund to cover the certified homes that are private entities. It merely prohibits discrimination against applicants or policyholders by insurance carriers, solely on the basis of their status as foster families in the certified home context. The policy decisions that support the prohibition of such discrimination in the state or county-licensed homes context appears applicable to the context in which DSS licenses Foster Family Agencies, which are organizations that recruit, certify, and train parents providing foster family homes not licensed by the state. Thus, this bill's expansion of the prohibition against this type of discrimination by insurance carriers appears consistent with existing law. Support : Aspiranet; American Federation of State, County and Municipal Employees, AFL-CIO Opposition : None Known HISTORY Source : Author Related Pending Legislation : None Known Prior Legislation : AB 2206 (Hill, 2010) would have limited the Fund's liability exclusions to only those criminal or intentional acts committed by a foster parent. That bill was held in the Assembly Appropriations Committee. SB 706 (Florez, 2004), among other things, would have narrowed the scope of the Fund and would have excluded from liability any losses arising from dishonest, fraudulent, criminal or intentional acts, or licentious, immoral, or sexual behavior on the part of either foster parent or any person residing in the home, even if there was a related allegation of negligence. That bill died in the Assembly Judiciary Committee. AB 1467 (Alby, 1997) would have clarified the scope of coverage of the Fund and, among other things, prohibit a natural parent from making a claim against the insurance fund for the wrongful death of a foster child when the child was removed from the home because of neglect, abuse, abandonment, or incapacity due to AB 2019 (Hill) Page 12 of ? substance abuse, if the natural parent was ineligible for reunification services. The bill died in the Senate Health & Human Services Committee. SB 470 (Royce, Ch. 195, Stats. 1988) removed Fund's sunset date and thereby allowed for continuation of the Fund indefinitely. SB 1159 (Royce, Ch. 1330, Stats. 1986) See Background. Prior Vote : Assembly Floor (Ayes 72, Noes 0) Assembly Appropriations Committee (Ayes 16, Noes 0) Assembly Human Service Committee (Ayes 6, Noes 0) **************