Insurance Issues For Child Day Care

By Sue C. Quimby, CPCU, AU, CIC, CPIW, DAE – Assistant Vice President/Media Editor

Children are our most important resource. They are also our most vulnerable citizens, needing and deserving the best care possible. When parents work, quality, affordable child care is extremely important.  Day care is a growing industry. Insuring day care centers requires knowledge of the risks as well as the legal and insurance requirements. Helping clients understand these risks and requirements is another value-added service of the professional insurance agent.

A survey by the US Census Bureau in 2011 noted that 61% of children under 5 years old needed childcare assistance. Much of this is provided by relatives. However, almost a third of children, or about 7 million,  are cared for by non-family members,  nursery, day care center, in-home care, or Head Start facility, including before and after school care. This includes nearly 5 million in organized preschools or daycare centers (https://journalistsresource.org). The U.S. Bureau of Statistics projects day care centers will have the fastest employment growth in the next two years (www.forbes.com).

For the insurance industry, this strong and growing market offers opportunity.  To be licensed, the center is required  to carry day care liability insurance. Professional liability would be necessary to cover staff in the event of a negligence suit.  This is in addition to standard property, general liability and workers’ compensation coverages. Commercial auto would be needed if company vehicles are used to transport children. Corporal punishment and abuse coverage would also be important to the facility. Finally, umbrella or excess liability coverage should always be recommended to address claims that could exceed the primary coverage limits.

For the insurance industry in states like New York and New Jersey, the active regulatory oversight helps keep losses to a minimum. Most states, including New York and New Jersey, require child care facilities be licensed. The states have their own guidelines which include rigorous inspection schedules.

In New York and New Jersey responsibility for child care regulation is the purview of the Office of Children and Family Services and The Department of Children and Families, respectively. The states require at least annual inspections that look at many categories of care. New Jersey has over 221 individual points of inspection. Broad sections include Supervision, Staff to Child Ratios, Activities & Discipline, Building Maintenance, and very importantly, Health & Fire Safety. Minimum staff levels are very important and are addressed in the inspection and licensing of care centers (www.ocfs.ny.gov) (www.nj.gov/dcf).

Fire safety is critical, since children are the most vulnerable in the event of a fire emergency. Between 2005 and 2009, fire departments from the U.S. reported an average of 590 fires annually in day‐care centers, having an annual average of 8 civilian fire injuries and $4.5 million in direct property damage. Most of the fires occurred between 6:00 a.m. and 3:00 p.m. and the primary cause involved cooking equipment (64%) (www.nfpa.org).

In an emergency, children’s reactions often reflect the actions and temperament of their teachers.  If teachers are nervous and upset, the children will be too. The importance of regular fire and safety drills cannot be overstated, so that everyone will remain calm and focused and know what to do in the event of a true emergency.

In addition to fire safety, the staff must be well trained in many areas. A good rule of thumb is to have at least two staff members trained in CPR, with all staff attending  at least 10 hours of continuing education a year in various categories. A sad fact of the current time is the necessity to have lockdown drills to prepare for active shooters. This would include having the fire or police helping to determine safe places to hide.

The importance of the inspection and licensing aspect is demonstrated in a 2004 study published in the NY Times on shaken baby syndrome. It found that infants are by far the most vulnerable children in care, and most often die from being shaken, usually by a caregiver stressed by constant crying. Reports covering 1989 to 2003 found 203 shaken-baby deaths in care in a private home and none in a child care center (www.nytimes.com/2005).

Day care centers are a vital and growing segment of the economy, providing a necessary service to working families. Helping these clients understand their exposures to loss and ways to further protect children is another sign of the true insurance professional.