Clergy Sex Abuse Scandal Raises Insurance Costs for Youth Programs

Kay Johnson’s western Massachusetts Big Brothers Big Sisters agency has never been hit with a claim of child sexual abuse. Yet its cost for insurance to cover such claims has more than tripled in the past year, forcing Johnson to think about trimming some staff and, perhaps, some kids from the program.

“I got this fax. There was this huge number on it. It was definitely a shock,” said Johnson, executive director of Big Brothers Big Sisters of Franklin County.

Across the country, insurance costs are rising for youth organizations, partly because of the sex abuse scandal in the Roman Catholic Church, according to agency officials and the insurance industry itself.

Robert Hartwig, chief economist for the Insurance Information Institute, said organizations that deal with children have seen their liability insurance costs outpace the average. “The problems in the Catholic Church have raised this problem to a higher level than otherwise would have been the case,” Hartwig said. “This is affecting the cost for all those organizations associated with youth.”

Franklin County Big Brothers Big Sisters, based in Greenfield, serves 200 children. The organization raised about $140,000 and paid $4,000 for liability insurance last year, according to Johnson. But this year it has been hit with a bill for $14,000 for a nine-month period. She expects the next full year to cost between $18,000 and $20,000, and she’s getting less coverage for more money.

Similar increases are affecting YMCAs across the country, said John Medler, chief executive of YMCA Services Corp., a for-profit subsidiary that provides insurance for about half the nation’s 975 YMCAs.

Medler said some insurers have simply stopped offering coverage to groups that work with youth. Others have remained in the business but raised prices and required agencies to tighten procedures to protect children.

“The pricing in the last two to three years has literally tripled, with half the coverage,” he said. A typical YMCA that might have paid $5,000 for $2 million in coverage two years ago is now paying $15,000 for $1 million in coverage, Medler said.

While the Insurance Information Institute doesn’t track specific costs for agencies that serve youth, Hartwig said the cost for liability policies offering the most protection against litigation has gone up 30 percent to 40 percent in each of the past two years.

Insurance companies were forced to pay out more in recent years for sex abuse claims and raised rates to protect themselves against future claims, he said.

“What insurers are doing is simply reflecting in the rates the losses they’ve suffered and they’re still trying to stem the flow of red ink,” Hartwig said.

The Boston Archdiocese agreed last year to pay $85 million to settle more than 500 lawsuits by people who said they were abused by priests. It was the largest known payout by a U.S. diocese to settle molestation claims, but hundreds of other settlements across the country in recent years have added up to hundreds of millions of dollars.

Boston church officials and insurance companies are still wrangling over how much of that insurance companies will pay. But Rev. Christopher Coyne, a spokesman for the archdiocese, said its liability insurance premiums went up 35 percent last year. He said the increase was only partly attributable to the church’s youth programs, and much of the rise was related to the archdiocese’s work in nursing homes.

Summer camps have also seen higher insurance costs, said Bette Bussel, executive director of the American Camping Association of New England. The region’s camps reported increases in their insurance costs ranging from 30 percent to 200 percent last year.

Mack Koonce, executive vice president and chief operating officer of Big Brothers Big Sisters of America, estimated that its 470 affiliates nationwide have seen two consecutive years of average increases of 30 percent in their liability coverage costs.

Boys and Girls Clubs of America Vice President Les Nichols said his organization’s 1,100 affiliates had also seen some “pretty dramatic increases” in insurance costs over the past three years.

Nichols sees another factor at work in the rate increases: insurance companies, which invest the money they collect, were hurt by a clumping stock market and are recouping those losses from customers.

Hartwig called that argument “a popular red herring” and said insurance rates are driven not by investments, but by how much the industry is forced to pay out. Also, two-thirds of the industry’s investments were in bonds during the recent bear market, and in 2002, its investments generated $37 billion in earnings. “The fact of the matter is the rates were rising even before the markets began to fall out,” Hartwig said, noting that the abuse scandal accelerated the trend.

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