Organizations serving vulnerable populations are experiencing a rise in complex liability risks, with claims becoming more frequent and severe. As standard carriers exit the space and contractual requirements evolve, Sexual Abuse and Molestation (SAM) coverage is increasingly needed and often only available through the Excess & Surplus (E&S) market.
For further insight, we spoke with Rahmad Bauldrick, Associate Vice President, Regional Practice Group Leader, Professional, Burns & Wilcox, Chicago, Illinois.
Who should be carrying SAM Insurance?
RB: We see many different sectors, including nonprofit organizations and business institutions, considering this coverage. It is especially crucial for anyone serving vulnerable populations, including:
- Elementary and secondary schools
- Religious institutions
- Homeless shelters and social service agencies
- Adult day care facilities and child day care centers
- Adoption and foster care placement services
- Rehabilitation and behavioral health facilities
- Transportation providers, including those that work with patients or youth
- Hospitals, counseling centers, and group homes
How would you describe the current market for SAM Insurance?
RB: “Chaotic” is the first word that comes to mind regarding the SAM Insurance market. This is a very volatile type of coverage, and it is really driven by severity. When a claim happens, it can be devastating to an organization — and SAM coverage is meant to help mitigate that damage from the moment a carrier is notified.
The volume and size of claims are rising, and courts are awarding large judgments, especially when children are involved. If a child is abused, that could impact that child for their entire life. With the increased size of judgments over time, insurance professionals question whether this coverage will be affordable in the near future. The standard markets are cutting back on limits because they realize the magnitude of their exposure
What factors are driving the shift toward Excess & Surplus (E&S) carriers?
RB: SAM coverage used to be built into standard Commercial General Liability (CGL) and Professional Liability, also called Errors & Omissions (E&O) policies; however, over the last 10 years, the severity of claims has outpaced the cost of the premiums. For example, a case where a carrier collected $2,000 in premium and ended up paying over $1 million for a settlement. That is not sustainable.
As a result, many carriers have pulled back, and most SAM coverage has moved into the E&S market where carriers have the expertise and rating knowledge to underwrite this exposure properly. Excess markets are also being used more frequently to layer coverage. For a high-risk class where markets might only offer $1 million in limits, we often need to stack coverage across multiple carriers to meet high-limit demands or contractual requirements. Rate, class, and claims experience are all contributing factors that drive SAM risks to the E&S market.
What risk management tools may be available with SAM Insurance?
RB: Carriers offer preventative services to increase an organization’s awareness. These services can include background screening tools, crisis response plans, abuse prevention webinars, and training programs. These resources help clients build protocols, train employees, and raise awareness around signs of abuse.
How are underwriting standards changing?
RB: As the market changes, many carriers are now limiting their appetite. For example, assisted living and youth risk such as camps and after school program exposures are among the hardest to place. The number of markets willing to consider these exposures has dramatically decreased.
How have U.S. legislative changes impacted the market?
RB: Legislative changes have enacted laws that extend or eliminate the statute of limitations on abuse claims. Individuals can come forward years after the fact and file suit. Some carriers are now refusing to write SAM coverage in affected jurisdictions entirely, while others will only do it with strict preventative measures in place.
Why should brokers partner with Burns & Wilcox?
RB: At Burns & Wilcox, with our expertise, access, and ability to develop creative solutions, we bring insureds and markets together. We use our relationships to collaborate with carriers to meet both the challenges and demands of providing abuse coverage in a time when the evolution of claims and their payouts have taken a grave toll on many carriers’ ability to continue to support offering abuse coverage. That is what makes Burns & Wilcox unique.
Sexual Abuse & Molestation (SAM) Insurance
WHY YOUR CLIENTS MIGHT NEED IT: Any organization working with youth, the elderly, or developmentally disabled individuals may be at higher risk for SAM claims. Standard CGL Insurance and E&O Insurance policies often exclude SAM, and contracts increasingly require SAM coverage.
PROTECTS AGAINST: Financial losses related to sexual abuse or molestation allegations, including legal defense and settlements. Many policies also offer crisis response and risk management resources.
EXPERT OPINION: “This is a very volatile type of coverage, and it is really driven by severity. When a claim happens, it can be devastating — and SAM coverage is meant to help mitigate that damage from the moment a carrier is notified.” – Rahmad Bauldrick, Burns & Wilcox
