A 3-year-old girl required 180 stitches to her face and spent days in the hospital after being tragically attacked by a dog April 2 at a home day care in Hemet, California.
The attack is one of multiple incidents involving home day care facilities to make headlines in recent weeks. On April 22, police responded to a hospital in Stafford, Virginia, where three infants were being treated after reportedly eating THC-spiked crackers at an in-home day care. The center’s owner is now facing charges of cruelty and injury to children. Earlier this month, a home day care business in Quincy, Massachusetts, was shut down over reported abuse.
“These incidents are never not shocking,” said Justin Pressly, Director, Personal Insurance, Burns & Wilcox, Morehead City, North Carolina. “It is very unfortunate to see such carelessness.”
In an environment where “there are so many things that can go wrong,” Pressly said, homeowners who operate home-based day care businesses must take all necessary safety precautions and obtain insurance coverage to address potential liabilities. This can include a home day care endorsement on their Homeowners Insurance along with a Personal Umbrella Insurance policy, said Sylvia Ornelas, Associate Vice President, Director, Personal Insurance, Burns & Wilcox, Los Angeles, California.
“You might think it is never going to happen to you, but the risk is too great when it comes to children,” Ornelas said. “When you are taking care of someone else’s child, you need to protect yourself. Take the precautions, but accidents do happen. That is what insurance is for.”
Home day cares at risk for being uninsured or underinsured
While home day care licensing regulations vary by state, the vast majority of child care settings in the U.S. are in homes, including over 1 million paid home-based child care providers, according to research organization Child Trends. In Canada, about 28% of the country’s 52,794 child care providers in 2021 were licensed and home-based, while over half were unlicensed and home-based, Statistics Canada reported.
The last thing we want to happen, that unfortunately could occur, is for a loss to be declined based on not having disclosed the business operations. It is so important to have this conversation with your broker.
Home day care providers should be aware that a standard Homeowners Insurance policy in the U.S. or Canada will not usually cover any home day care liability, said Michelle Allemang, Manager, Western Canada Personal Insurance, Burns & Wilcox, Vancouver, British Columbia.
“Typically when you have any type of business exposure, it is excluded from a Homeowners Insurance policy form,” she said, noting that homeowners must disclose any home day care operations on the premise when purchasing Homeowners Insurance. “The last thing we want to happen, that unfortunately could occur, is for a loss to be declined based on not having disclosed the business operations. It is so important to have this conversation with your broker.”
Insurance coverage for an in-home day care is typically offered as a home day care endorsement on the Homeowners Insurance policy. Adding this endorsement means a variety of day care risks, from professional liability associated with staff mistakes to injuries suffered by enrolled children, can be covered. It can also cover legal defense and allegations of abuse or molestation.
“There can be lawsuits, expensive medical bills; that is just the reality of the perils involved when you are looking at home day cares,” Pressly said. “These are all things the endorsement can provide that the Homeowners Insurance is not going to offer. The Homeowners Insurance will not adequately cover the liability exposure of having children in your care and running a business from your home.”
Unfortunately, many homeowners are unaware of this fact, according to Pressly. “If they are sued, they could have to pay for those medical and legal bills out of pocket,” he said.
There can be lawsuits, expensive medical bills; that is just the reality of the perils involved when you are looking at home day cares. These are all things the endorsement can provide that the Homeowners Insurance is not going to offer.
Home day care endorsement coverage may depend on the number of employees working at the home, how many children are cared for, and where the home is located, he explained. Personal property related to the day care business can also be covered, Ornelas said.
It is likely that many home day care owners are uninsured, leaving them at risk for financial devastation in the event of a loss — even if it appears to be unrelated to the day care business.
“If they do not have the appropriate coverage, they can still be sued and they could lose everything,” Ornelas emphasized. “Even if they have a separate commercial insurance policy for the day care, they need to let the Homeowners Insurance carrier know because some carriers will still not insure the home, and they could deny any other type of claim based on misrepresentation.”
Although occasional paid babysitting may not warrant a home day care endorsement, it is best to err on the side of caution, Allemang pointed out. “Typically, there is some coverage for incidental business exposure, like an infrequent occurrence of babysitting, but if it becomes routine and compensation is involved, then it is a better practice to be sure that the coverage would respond,” she said.
In-home summer day camps and before- or after-school care would usually need the coverage, Pressly added.
Pets, pools and trampolines among highest day care hazards
Dog bites are a liability concern for any homeowner, with or without a home day care. In the U.S., around 4.5 million individuals suffer dog bites each year, and in 2018 dog bites were the 13th leading cause of nonfatal emergency room visits, according to a study published in 2020 in the journal Injury Epidemiology. In 2021, dog-related injuries made up over a third of homeowner liability claims, Property Casualty 360 recently reported.
In July of 2021, a 2-year-old child required surgery and almost 80 stitches after suffering a dog bite at a day care home in Nova Scotia.
“It is so important to make sure that your Homeowners Insurance policy, with or without the home day care endorsement, covers animal liability,” Ornelas said, noting that other animal-related risks include cat scratches or a dog knocking over a child by accident. “These things can be very costly for the home day care facility because when it comes to kids, you also need to make sure they do not have any long-term issues. Something as simple as a broken bone, for a child, can have a life-long negative impact.”
Insurance carriers may also restrict coverage depending on the breed of dog in the home. “It is going to be very difficult for any homeowner with or without a day care to get insurance with a higher-risk breed like a pit bull or a Rottweiler. That is likely going to be excluded,” Ornelas said.
It is so important to make sure that your Homeowners Insurance policy, with or without the home day care endorsement, covers animal liability.
Day care homes with pools or trampolines may also be more difficult to insure due to the high risk of injuries, or there may be specific requirements about fencing and other precautions. Even smaller pools can present a severe hazard; in 2017, a 1-year-old boy drowned in an inflatable pool at a home day care center in northeast D.C., Fox 5 reported. Cannabis exposure is another growing area of risk, with the Washington Post reporting in April of 2021 that poison control centers saw a major uptick in accidental THC ingestion in 2020 compared to a decade prior, with the majority of cases involving kids under age 5.
It is also prudent for families who are dropping their children off at an in-home day care to check that the provider is properly insured. Otherwise, the family of the injured child could be stuck with the cost of the claim and have to sue the day care operator for restitution.
Insurance is about protecting against known hazards and those that are unknown, Ornelas said. “There are trip-and-falls, risks with large playground equipment or slides, cracks in the concrete; the potential liability is huge,” she said. “The payout may not be as big as a dog bite attack, but kids can fall and break a bone and you are going to be responsible for those hospital expenses.”
Excess liability limits can offer additional protection
Home day care owners can take a variety of steps to help reduce their risk of a loss. This can include fencing around outdoor play areas, removing access to pools or trampolines, and keeping animals separate from the children. Maintaining proper staff-to-child ratios is also important, along with “making sure that number is not beyond the scope of what an individual can care for,” Allemang noted.
“Being transparent with their insurance broker is really important,” she said. “If they are considering these operations or already have them in place, they really need to assess all of the risks involved and whether or not their insurance coverage would respond.”
In-home child care providers should know that even with a home day care endorsement on their Homeowners Insurance policy, standard liability limits may not be enough. By purchasing Personal Umbrella Insurance, home day care owners can obtain additional liability limits above and beyond what their other policies offer, Allemang said.
“The limits for the home day care endorsement can vary; some could be to $500,000 or some could go to $1 million, depending on the circumstances,” she said. “Especially if you have a higher net worth, you might want to look into an excess liability option.”
In fact, Personal Umbrella Insurance is a good idea for anyone, Pressly said. “Apart from running a business, there is really good reason for it even from an auto perspective. If you are picking kids up from the bus and taking them back to your home and you are in a car accident, if your policy only provides a certain amount of coverage, you are going to want a Personal Umbrella Insurance policy to step in and assist you with the additional expenses,” he said. “There are a lot of times where the primary policy limits can easily be exhausted.”
Reading through your policy verbiage carefully is important, Pressly encouraged, “to determine if what you are paying for is the best coverage for you.” Home day care owners can also ask their insurance broker about if or when they should consider a Commercial General Liability (CGL) Insurance policy. “If you already have a number of children in your care and you have plans to expand your business, considering a commercial policy is probably the best way to go,” he said.