Day-care centers struggling to find insurance

IT has not been the day-care industry's finest year. First came months of negative publicity surrounding charges of sexual abuse in a California center. Now day-care providers are reeling from a second blow: dramatic increases in the rates they must pay for liability insurance.

Some centers have had liability policies canceled. Other facilities still able to get coverage find their rates are doubling and tripling, according to James Strickland, director of Child Inc., a nonprofit organization in Austin, Texas. Coverage that averaged $7 per child per year has in many cases gone up to $20 or $24 a year, he says -- costs that must be passed along to parents.

``There are really two issues -- one is access [to insurance] and one is affordability,'' says Deborah Phillips, director of child-care information service at the National Association for the Education of Young Children in Washington, D.C. ``We have a short-term crisis -- finding insurance. But there's going to be a short-term and long-term problem of affordability. It's the affordability issue that's going to be with us for a long time.''

For families of the 8 million children now using day care, these increases have potentially serious ramifications. A few centers have already closed, Mr. Strickland notes, and others will follow if they cannot find coverage.

``It's the perfect Catch-22,'' says Rep. George Miller (D) of California, chairman of the House Select Committee on Children, Youth, and Families, which has been investigating the issue. ``You're required to have insurance to get a license, but insurance companies won't insure you.''

Part of the problem, day-care specialists say, stems from the insurance industry's concern over sexual-abuse suits. But figures on actual claims paid out are hard to pin down, and many believe corporate fears are greatly exaggerated.

The rest of the problem can be traced to a general downturn in the insurance industry, affecting not only day-care facilities but businesses and professions. Yet as Abby Cohen, an attorney with the California Child Care Law Center in San Francisco, points out, ``Unlike doctors and lawyers, child-care providers don't make very much money and aren't able to set up their own self-insurance or group insurance companies.''

David Willis, a spokesman for Cigna Corporation in Philadelphia, explains the industry's dilemma. ``The insurance industry runs in cycles,'' he says. ``Every 3, 5, 7 years prices will decrease for a while, and then they'll increase. Prices have been decreasing in the business insurance market -- you could get more coverage for the same dollar in 1983 than you could in 1977. A lot of day-care centers that are in operation today were not in operation 10 years ago, when they would have had to go through th is insurance price increase before. There's a lack of awareness of the insurance business.''

That explanation will be of little comfort to facilities unable to afford -- or even obtain -- liability coverage. Moreover, the realization that insurance is impossible to obtain comes as a shock to many people.

``We've just taken for granted that liability insurance would always be available,'' says Eleanor Guggenheimer, president of the Child Care Action Campaign in New York. ``We all grew up on Lloyd's of London, which is ready to insure anything for a price. I don't think the insurance field is made up of monsters, but it is made up of people who want to make money, and they have been losing money.''

Hardest hit, according to Mr. Strickland, are home day-care providers, the backbone of American day care. As the smallest facilities, he says, ``they represent the least amount of income to insurers per insuree. And as a group, family day care is the least regulated. In some states you have only to be registered, as opposed to licensed.''

Some home day-care providers have lost not only their liability insurance but also their homeowner's policies. Washington State's insurance commissioner has issued emergency regulations making it an unfair business practice for companies to cancel or refuse to renew a homeowner's policy when the home is used for child care.

Part of the challenge in finding solutions grows out of wide variations in insurance regulations, which are determined on a state-by-state basis. But child-care specialists agree that a solution must be found quickly to avert major problems next month.

``We know that the end of August, the beginning of September is going to be a very difficult time, because most child-care programs have their insurance renewals coming up in August and September,'' says Deborah Phillips. That timetable also coincides with an annual ``bulge'' in day-care placements when school begins.

To forestall a crisis, day-care specialists, insurance brokers, and legislators across the country are exploring what Ms. Phillips describes as ``every possible solution that can be pursued -- solutions that could emerge from the insurance industry, possible legislative remedies, and perhaps even some legal cases.''

``We're working with representatives of the insurance industry,'' Ms. Guggenheimer says, ``and we have met with at least a positive attitude toward trying to work something out. They are interested in trying to find some solutions that will protect the industry but at the same time protect the public. We are frankly hopeful that something can be worked out.''