Hawaii is moving to shield child welfare nonprofits from mounting liability risks that threaten to push service providers out of the state's foster care system.
House Bill 1645, now under consideration in the Hawaii Senate, would bar the Department of Human Services from including indemnification and hold-harmless clauses in contracts with child welfare organizations.
The measure would also prohibit requirements that either party be named as an additional insured on the other's liability insurance policy.
The bill would further limit legal exposure by banning pre- and post-judgment interest and punitive damages, removing joint and several liability and eliminating bond requirements for organizations seeking an appeal. Actions against these organizations would be tried by a court rather than a jury, with certain exceptions.
The legislation responds to a pattern of increasingly frequent lawsuits and severe penalties facing nonprofit child welfare providers across the country. According to the bill's summary, these organizations are often named as defendants even when they are not found responsible for harm.
The resulting large-scale judgments have destabilized the insurance market, forcing providers into the excess and surplus lines segment where they face reduced coverage at higher costs. If left unaddressed, the liability burden could drive nonprofits out of child welfare work entirely, creating service gaps and straining Hawaii's state resources, the summary said.
The state is not alone in confronting these pressures. New York lawmakers have separately considered creating an assigned-risk market for foster care agencies.
Private foster care agencies in New York face approximately 800 lawsuits filed under the Child Victims Act, and in nearly 40% of those cases the insurance policy has since been voided. Senate Bill 9113 would require all carriers writing commercial risk insurance in the state to participate in an assigned-risk program.
The scale of liability exposure facing the sector is not confined to legislative debates. A Sonoma County jury awarded $25 million to three siblings who sued a foster care agency over sexual abuse by a foster parent.
"By preventing contracts from requiring providers to insure public entities for the public entities' own negligence and by capping certain legal risks, the bill makes liability more predictable and insurance coverage more attainable and affordable, reducing the likelihood that crushing judgments or skyrocketing premiums will force providers to exit the system," Damien Zillas, senior corporate counsel for the Nonprofits Insurance Alliance, said in a statement.
Zillas added that the measure would not prevent parties from recovering damages in cases where a child welfare provider caused harm.
