New York Child Victims Act (CVA) – Consequences for Insurance Cost & Availability
Back in the fall, we wrote about the New York Child Victims Act (CVA), signed into law on February 14, 2019, and its impact on insurance claims. Fast forward a few months, and we are now in the thick of dealing with the follow-up effects of this well-intended legislation. As such, the team at Rose & Kiernan, Inc. wanted to review where we are over a year after the CVA was signed into law and the impact thus far on both insurers and organizations with an eye on what could happen in the future.
What’s happened so far?
In short, the law raises the statute of limitation to file a civil suit until the victim is 55-years-old in addition to a one-time “lookback window” which removes the statute of limitations from August 14, 2019 – August 14, 2020. According to Insurance Business, many institutions including colleges, non-profit organizations and private schools began reviewing their general liability policies to make sure they were covered for potential claims in January 2019 before the CVA was signed into law.
Since the “lookback window” was opened, the insurance industry has seen an overwhelming number of claims filed by institutions seeking coverage for large child abuse lawsuits, which came as no surprise. With this news, actuaries anticipate several changes to the insurance industry as a result of the CVA, including premium increases and coverage restrictions. So, although the legislation was well-intentioned, it doesn’t come without consequences for many businesses.
What’s happening in the insurance industry?
Before we dive into what is happening with businesses, it’s important to pull back the curtain to show what is happening in the insurance industry with respect to the CVA. Many insurance firms have started the lengthy process of digging up old insurance policies and then determining if the client was even covered for sexual abuse claims since many old policies did not include this. Once the policy is recovered and coverage is deemed available, the claim can move on to be settled in court. The court then decides whether a victim should receive payment and if so, in what amount. “If there’s more than one occurrence and if that’s deemed, under New York law, to be recoverable, then there will be multiple policy payouts,” says Florina Altshiler, managing partner at Russo & Toner law firm on The Insurance Law Podcast.
What’s happening now is that many insurers faced with large claims are pulling from already depleted reserves, reports the Wall Street Journal. These reserves are predetermined and based on what they expect to pay on future claims, often using the statute of limitations to inform those estimates but with an influx of claims from the CVA, they are coming up short. Many are turning to reinsurers to help, but even reinsurers are overwhelmed which has led to some institutions filing for bankruptcy.
What’s the impact of CVA on our clients and other businesses?
“Right now, our producers are meeting with clients to discuss industry-wide issues of price increases and coverage restrictions. It’s tough for any organization and we fully understand that many non-profits have a lot to contend with regarding tenuous funding,” says John Kerin, vice president at Rose & Kiernan, Inc. Experts predict that businesses will see an increase in insurance premiums and coverage restrictions following the close of the “lookback window” on August 14, 2020. “Actuaries are responding to this change in the industry by recalculating what to charge for current policies to make up for the new liability,” says Kerin. This is causing many insurance companies to increase premiums as well as write out sexual abuse coverage in some cases. With premiums increasing, many non-profit organizations are unable to afford insurance to keep their businesses running. At the same time, insurers and underwriters are still figuring out whether and how to offer coverage.
“One way that insurers may counteract this is with a pull-back in limits offered,” says Kerin. “For example, cutting back a ten-million-dollar umbrella to a five-million-dollar umbrella, yet still charging the ten-million-dollar premium. They could also pull-back on offering abuse and molestation (A&M) coverages.” Some insurers are even dropping institutions that may put them at risk of another CVA claim. One way that insurers are preventing future child sexual abuse claims is by requiring the businesses that they insure to complete sexual abuse trainings in order to obtain coverage.
Similar legislation is expected to be passed in Connecticut soon and possibly even nationwide, reports the Albany Times Union, which would affect many other businesses. Businesses throughout New York state should review their current policies regarding child abuse and molestation coverage to prepare for the changes. Additionally, businesses should be aware that their premiums may increase as a result of the CVA and should make sure that they are currently covered if their business involves interaction with children.
At this time, due to COVID-19, New York’s state court system is no longer accepting CVA lawsuits. Public pressure was put on lawmakers to extend the one-year lookback window. However, the state legislature did not move to extend the window in the recent state budget, reports the New York Law Journal. They then add that “It remains unclear whether legislators will greenlight an extension to the CVA later on this session.” We will continue to keep an eye on this story for any new developments.
For more information on New York state’s ‘Child Victims’ Act, please contact the team at Rose & Kiernan, Inc. here or by calling 800-242-2433.