The Real Risks in Family Child Care
The following incidents occurred in family child care homes. The amount of money shown is how much the child care provider's business liability insurance policy paid out in claims.
A day care child pulled down a bottle warmer on top of another child: $525,000.
A three and a half month old child died of SIDS: $435,000.
An older child dropped an infant on the floor: $300,000.
A bookshelf fell on a child: $273,000.
A provider was accused of negligence in the death of a child: $240,000.
A two-year old was poisoned with E. Coli: $130,000.
A parent alleged that the provider's son assaulted their daughter: $118,000.
A child fell and broke her leg: $90,000.
A child fell off monkey bars: $75,000.
Every family child care provider knows that caring for children in her home increases the risk of damage to property and injury to children. There is no way to eliminate these risks, but there are many things child care providers can do to reduce them.
The most effective way of reducing the risks of your business is to purchase professional business liability insurance. Unfortunately, only a small percentage of all licensed child care providers have taken this step.
What would have happened in the above cases if the child care provider did not have business liability insurance? It's possible that she would have been stuck with a huge legal judgment against her that she probably could not afford to pay.
Some believe that it's not worth purchasing business liability insurance because they don't have enough personal assets to worry about a lawsuit. This is shortsighted thinking. Depending on the state you live in, you can still be in deep financial trouble, even if you don't have much money to your name.
Here’s what might happen. Let’s say that in one of the above cases the parent sues you for $300,000 when her infant is injured after being dropped on the floor by an older child. Without business liability insurance, you would have to hire a lawyer to defend yourself (and pay the lawyer even if you win). If the judge awards the parent $300,000 and you have no money to pay it, this is not the end of the matter.
Your state law may allow the parent to put a lien on your home, meaning that when it’s sold the proceeds will go to the parent. You may be required to sell your IRA investments and some of your personal property (motorbikes, second car, etc.). If you marry, your new spouse’s assets might be taken. If you get an inheritance, it might be seized. Clearly, this can be a financial nightmare for the rest of your life.
The risk of a lawsuit doesn’t end if the parent decides not to sue you. I once got a call from a child care provider who said, “Thirteen years ago a child was seriously injured in my program and had to go to the hospital. I cared for the child for several years after the child returned from the hospital and then moved away and went out of business. Now the child is eighteen and is suing me for the injury that occurred thirteen years ago.”
In most states, children can sue up until they reach age twenty-one for injuries suffered when they were minors. This child care provider did not have business liability insurance to defend her against this lawsuit.
You cannot afford to be without business liability insurance to protect yourself from the many risks of running a business. In most cases, good business liability insurance costs only a dollar or two a day.
Tom Copeland - www.tomcopelandblog.com
Image credit: https://www.pxfuel.com/en/search?q=unhappy+child
For more information, see my book Family Child Care Legal & Insurance Guide.
