Important considerations for childcare businesses:
Focus on Molestation/Abuse Cover
Running a childcare business involves ensuring the safety and well-being of the children under your care. One critical aspect of this responsibility is having adequate childcare insurance coverage, specifically for legal liabilities arising from molestation and abuse. Understanding the nuances of this liability cover can protect your business from severe financial impacts.
Below we take a brief look at the key considerations for childcare businesses.
1. Molestation Liability Cover
a. Shift from Occurrence Basis to Claims Made and Notified
The majority of childcare liability insurers have shifted from offering coverage on an occurrence basis to a ‘claims made and notified’ basis. This shift means that:
- Claims must be notified within a period for which a current policy is in place:
To be covered, a claim must be reported to the insurer within a period for which a current policy is in place. - Retroactive date significance:
The incident must have occurred after the retroactive date specified in the policy. Additionally, it should not have been notified or claimed under any previous insurance policy with another insurer. - Prompt incident notification:
It is crucial to notify your insurer of any incidents as soon as you become aware of them. Delays in reporting can jeopardise coverage.
b. Sexual Abuse Cover Exclusions
Sexual abuse cover typically excludes any fines ordered to be paid by a perpetrator from a criminal court. This exclusion underscores the importance of understanding the scope and limitations of your coverage.
2. Civil vs. Criminal Liability
Understanding the difference between civil and criminal liability is essential for navigating molestation and abuse claims.
a. Civil Liability
Civil liability involves disputes between two parties and usually relates to a breach of duty or negligence in conducting your professional duties or business operations. Claims falling under civil law typically result in financial compensation rather than criminal penalties.
b. Criminal Liability
Criminal liability arises when a law is broken, and the state imposes fines or imprisonment. An example relevant to childcare businesses might include an insurable penalty for an offense under the National Education Regulations that undergoes criminal proceedings.
3. Moving insurers
Switching insurers can be complex, especially when it comes to molestation and abuse coverage. There are critical factors to consider to avoid gaps in your coverage:
a. Awareness and Risk of Rejected Claims
When moving insurers, be mindful of the potential for claims to be rejected if there’s an undiscovered or unreported incident of abuse. The previous occurrence-based policy wordings will respond if still in place, but it’s essential to:
- Consult your Account Manager: Ensure your claims-made policy includes a retroactive date effective from the date that continuous claims made cover commenced. This allows the policy to respond to claims for alleged or actual acts of abuse that occurred prior to the current policy period.
b. Moving from Claims Made to Claims Made Insurer
As your broker, we can assist in securing terms with appropriate retroactive cover to ensure continuous protection.
c. Maintaining Continuous Cover
Maintaining continuous cover is crucial to ensuring future claims are covered. If your operations cease, we can help with “Run Off cover.” This cover is available through certain insurers by converting an existing policy to “run off.” An additional premium may apply for the required period.
Conclusion
Navigating comprehensive insurance cover for childcare businesses requires a thorough understanding of policy terms, prompt incident reporting, and careful management, particularly when looking to switch insurers. At Austcover, we are committed to providing the expertise and support you need to safeguard your operation against the daily risks you face.
Talk to our team of insurance experts to discuss your needs. We’re here to help ensure you have a suitable risk management and insurance program in place so that you are prepared, should the unexpected happen.
Important notice
All information in this article is of a general nature (and has been prepared without taking into account your particular objectives, financial situation or needs. Before acting on any information contained herein, you should consider its appropriateness to you.). The information provided is not intended to replace any accounting, financial, insurance broking, legal, tax or other professional advice. Austcover Pty Ltd ABN 46 073 425 662 holds Australian Financial Services Licence No. 241799.