Foster Parent Liability Risks: The Role of the Agent

According to the U.S. Department of Health and Human Services Administration, approximately 407,000 children have been placed in the foster care system in the United States. Society encourages becoming a foster parent, but in the midst of meeting the numerous requirements for a foster parent license, a candid conversation about liability exposures is lost.

Foster children range in age from newborns to teenagers with an average age of 9 years old, according to the U.S. Department of Health and Human Services Administration. They are placed in the care of foster parents for what could be just a few days or more than a decade, with an average stay of roughly two years. Considerable stress and uncertainty is involved in the process, for both the child and foster parents.

Although foster parents typically receive a monthly stipend of about $400 to help reimburse for expenses, fostering is an act of service. Individuals interested in becoming foster parents must undergo several months of training, a home inspection, intensive interviews and a detailed background check.

But too often, foster parents do not receive adequate guidance on personal risk management. The Department of Health and Human Services often recommends obtaining coverage from an insurance company, but this coverage is usually limited or may not even be available.

This is where an agent who has a personal relationship with their client can provide invaluable guidance and advice. Raising children under the best of circumstances can be a challenging situation. Taking responsibility for someone else’s child, about whom you know very little, is even more challenging. Imagine the following scenarios:

1. The foster child is playing and running around the house and hits her head on a table. The injury requires stiches and leaves a permanent scar. The biological parents try to sue the foster parent and collect damages. (Note that this is a relatively minor scenario—it is easy to imagine far more tragic circumstances.)
2. The foster child is playing with matches behind the neighbor’s house and accidently starts a fire. The neighbor sues for the resulting property damage.

After reviewing the homeowners policy coverages and exclusions, it appears there is no coverage in Scenario #1. Because a foster child is considered an insured by definition, injuries sustained as a result of the named insured’s (foster parent) negligence or other tortious actions are not covered. The foster parent would therefore be responsible for the cost of litigation and defense in this situation.

But the homeowners policy could provide protection for the insured foster parent in Scenario #2. The age of the child and intent might play a part, but the severability clause would separate the alleged negligence of the child and parent, treating each individually.

Of course, many more scenarios can arise in a litigious society. After taking steps to find out whether clients are foster parents, an agent will be able to increase their clients’ awareness of exposure and inform them of their limited insurance coverage. The agent can also provide guidance on state programs that may provide legal protection in the case of negligence charges. These programs may include four different types of approaches:

• The state purchases an excess and surplus lines policy to provide liability protection for licensed foster parents.
• The state provides a trust to indemnify foster parents for their losses.
• The state offers foster parents immunity from civil liability unless in the presence of gross misconduct, such as sexual improprieties.
• Foster parents are treated like state employees. Generally, this change in the statutory definition of who constitutes a state employee allows the foster parent to seek refuge against civil liability, absent gross negligence or conduct outside the scope of their job duties.

Not all states have a program, and those that do have their own unique design.

Asking whether a client serves as a foster parent is not usually on an agent’s list of typical questions. But considering the risk involved, maybe it should be.

David Marlett is chair of the Department of Finance, Banking and Insurance at Appalachian State University. Jamie Anderson is assistant professor of Finance, Banking and Insurance at Appalachian State University.