Chuck and Grant discuss the benefits of daycare insurance and how this coverage will protect you where a general liability or homeowners policy will not.
Below is a transcript of the episode, modified for your reading pleasure. For more information on the topics discussed in the episode, see the links at the bottom of this post.
* * *
Grant FINLEY: Welcome to Your Insurance Connection Podcast. I'm your host, Grant Finley, joined once more by the President of CLH Insurance, Chuck Hembree. Chuck, nice to see you today.
Chuck HEMBREE: Good afternoon to you.
FINLEY: So, Chuck, we've dove into a lot of different topics on here, but one that's a little more niche that I think I'd like to talk about today is daycare insurance. Now, obviously, daycare insurance is for daycares, but can we unpack that a little bit? What exactly is daycare insurance and why is it even an option?
HEMBREE: Well, I think it's a great topic because we're in an economy where, probably the majority of us, as families, are duel income earners - husband and wife and so a lot of families have to make decisions on what happens during the day then, who takes care of my kids, who do I entrust my kids to? It is fantastic if we have the grandparents that would take care of our kids because we know they're going to be loved. We know they're going to be taken care of well, but not all of us have the ability to do that or else the grandparents aren't close enough that they can do that and we don't have other family members, so daycare may be an alternative that we have to look at. So, with that burgeoning industry, daycare has come up to meet that need. And just as carefully as we would want to pick a daycare that fits our kids and so forth, our daycares need to prick the proper coverage that they need to protect themselves because parents are very picky about how their kids are taken care of.
FINLEY: I'm curious then, are there any legal parameters you have to fall under in order to run one of these operations?
HEMBREE: Well, it really differs state to state, and it differs depending on what kind of services that you offer. So, for instance, in Missouri if you're going to be offering food services, so you're going to be providing lunches and so forth, are you cooking them, do they bring it with them? There's different requirements for different types of services that are provided. Generally, you want to make sure a public daycare is licensed by the state. That means then, that somebody from time to time is going to come in and inspect the facility to make sure it's safe, that it lives up to the state's standards of care, and then you have a reasonable amount of security that someone's watching over that besides yourself, and if there is a problem, there's a resource to go to: the state to help you out with that problem. Again, requirement of insurance is one thing, having the insurance is another. So let's talk about from the requirement standpoint first. If the state licenses you and you are open to the public, they do require you to have insurance. They're going to have certain stipulations about limits of insurance and the type of protection that's there, and we have lots of markets that can respond to that. Now, occasionally there are situations where we're not licensed and it's not required. So, that may be where I take care of my kids and maybe a neighbor's kids. We sometimes have the same situations that we would sometimes have with a public daycare, but there's not a requirement to have insurance. Still, we may want to think about that and make sure that either our homeowners is going to respond, which is rare, or that we secure daycare insurance, at least general liability to give us some protection in case we're sued.
FINLEY: So, then why go with daycare insurance over a similar type of coverage? You mentioned a few just now, but what is it about daycare - I assume it's a lot of different things rolled into together that are going to support that type of business, but can you explain why daycare insurance might be the right answer for somebody who's opening this up, rather than trusting a homeowners or a general liability?
HEMBREE: Well, first of all, a homeowners generally will exclude daycare services. Its pricing was just not intended to cover that type of exposure. If they see that you're only taking care of yourself or you're bartering services just - this weekend, you take care of your neighbor's kids and next weekend, they take care of your kids so that you can go out on dates. I know we used to do that all the time. Then there may not be a problem or they will put on a small endorsement to give you the coverage that you need because it's rather low exposure and it's not a constant day-to-day exposure. But sometimes we need to go to a daycare policy because it's going to meet those day-to-day needs that are there. Obviously, there is a higher exposure to medical payments. Trip and fall, you've got kids falling over all the time, they're toddlers a lot of times. Some of them are just beginning to walk. Many of these facilities have playgrounds and things to keep kids entertained, there's also teaching, and there's tools that those teachers are going to use - I don't mean actual tools, I mean play tools, learning tools. So, with those comes other exposures too. Then, again, parents are very protective. They want to make sure that their children are taken care of so they may have an accusation of harm to their child. They may see a bruise that they can't explain and automatically they're going to assume that that was the result of the daycare. Now, that could take place in a lot of different ways. They may say, "Hey, daycare provider, you did this yourself to my child," or, "You allowed a child to do that to my child and you didn't provide proper oversight." So, the exposures can really grow and they may bring a claim for corporal punishment. Now, when we think of corporal punishment we may think of spanking a child, or using a belt on a child and their idea may be entirely different. They may call it corporal punishment but they may call it that because you put that child in timeout in a corner for an inordinately long time, according to the parent, and they saw that as harsh, so they bring a claim against you. So, if you have no coverage here underneath a daycare, your homeowners is not going to defend you, it's not going to respond to that type of work type exposure.
FINLEY: Let's dive into those exposures a little more. You touched on a couple of the claims that would probably pop up a lot but what are some of the more common claims that are brought against a person who is looking after some children in a daycare facility?
HEMBREE: Well, that's probably one of them, that they're not giving my child the attention that they promised, either contractually, maybe they promised to provide certain services so a daycare provider is at risk there. The bodily injury that we talked about, either forcefully sitting down a child - all children are not compliant all the time and we need to handle them in a reasonable way and some children have to be handled more with tough love than others, but it has to be reasonable, it can't be harsh. Well, harsh is in the eye of the beholder, so there's always exposure there when helping mold children's disciplines. Elopement is another problem too. You're maybe not giving the proper care and the child escapes. I've seen some good escape artists, little kids that are like little ninjas, they can climb the fences, they can get out, and a daycare is responsible for the safety of that child while they're in their care. So, that's a great responsibility whether its proper fencing, the way that the house or the facility is set up so that if you fall you don't hurt yourself, proper flooring, no sharp objects around, proper playground equipment, proper covering underneath those playground equipment, and even proper toys. What's the age and condition of those toys? All of those are great exposures that daycare providers have to provide. And also, then, the care ratio. Do we have more kids than we have aids to take care of the children? It has to be good responsibility there and some states are very specific in how many care givers there have to be per number of children and some are more ambiguous. When you have claims, you may not have the law telling you exactly how it's supposed to be handled and those grey areas can create problems as well.
FINLEY: Alright, so, I'm thinking about starting up a child care or daycare center, or I've already got one and I just want to make sure that I'm covered appropriately. What do I need to do?
HEMBREE: Well, first of all, think through your organization. What kind of forms do you have in place? When you sign kids up, do you have that in place? You need the proper paper work so you're both expressing expectations to the parents of those you're going to take care of and they have proper thinking about what you're going to do. So, it provides a good two-way communication and they can sign off on it. So you've got to have good forms or have your agent or broker help you with those forms. You ought to have a good inventory of what your personal property is because you're going to need coverage for that. And, if you are having it in your house, you need to divide that property. What is that property that belongs to the home and that that belongs to the daycare. Have you incorporated or set yourself as an LLC some other way to distinguish yourself from the home exposure if you work in the home? You need that protection so that your personal assets aren't at risk. Then, you need to know how many square feet are you going to use for this. Do you need a state license? How many children can you have in the square footage that you can allow and how many people are going to help out? If you have over five in the state of Missouri, five part time or full time, you're going to have to consider work comp, so the agent or broker that you approach is going to need to know what the payroll is. And then, they're going to need to know the age of the children that you're taking care of, the hours that they're taken care of, because it may not be nine to five, it may be an early childhood program so that you can take the kids before work and then there's a time after work, so usually daycare's work with extended hours because they're trying to accommodate the needs of the parents. While they're there, are those kids ever going to leave the premises? If so, how are they going to do it? Is there an auto exposure there? Is there proper oversight and proper driver training for that? Has that been expressed to the parents? There is a plethora of questions that need to be added, so the better you can present your daycare and what it does in operation, the better job the agent or broker can do for you in covering you properly with that special daycare insurance.
FINLEY: Sounds like there is just a ton of information in here and you're a wealth of knowledge as usual, so we thank you for that. I think we'll wrap it up with that though, but if anyone out there is curious about getting into this industry, we certainly encourage you to give us a call - talk to Chuck or any of the other Account Executives on staff here and we'd be happy to talk about your options or what resources we can help provide, but until then, we will bid you adieu and thanks for listening.
Your Insurance Connection podcast can be heard on iTunes and Stitcher or by visiting clhins.com/content/podcast. If you like what you’ve heard you can support this podcast by rating and/or sharing it on your social platforms. CLH Insurance is a “Trusted Choice”, independent agency servicing Missouri, Kansas and Illinois. For more information on CLH Insurance, visit clhins.com or call 636.391.0700 to speak with an agent. Until we connect again, thanks for listening.
* * *
Show Notes - Where you can learn more about the people and ideas discussed in this episode.