Insurance companies are cutting back coverage for community foster agencies in Illinois, causing higher costs, fewer options, and reduced coverage. Agencies warn that if this trend continues, some will be forced to close, sending foster children back to the Illinois Department of Children and Family Services (DCFS), which many say is already overwhelmed.
In Illinois, DCFS partners with community foster agencies to care for children in state custody. In 2024, about 20,000 children were in foster care, with more than 4,000 placed with community agencies.
These agencies are licensed by DCFS and must carry several types of insurance, including liability insurance. While lawsuits against DCFS are capped at $2 million in damages, there is no cap for lawsuits against community agencies. In recent years, several agencies have faced expensive lawsuits.
One high-profile case involved the death of 2-year-old Lavandis Hudson after Lutheran Social Services of Illinois returned him to his mother’s care. In 2018, the boy’s father sued the agency for $45 million. A jury awarded the amount, although a later settlement reduced the payout.
Large lawsuit settlements have made it riskier for insurance companies to cover foster agencies. As a result, insurers have raised premiums or pulled out of markets. In California, after a $15 million settlement, the main insurer, Nonprofits Insurance Alliance (NIA), stopped renewing foster agency policies altogether.
Now, NIA is cutting back in Illinois too. Andrea Durbin, CEO of the Illinois Collaboration on Youth, called the situation “very complicated,” noting the need to balance restitution for harmed children without destroying the infrastructure that supports vulnerable families.
Reduced Coverage and Rising Costs
Pamela Davis, CEO of NIA, said it’s difficult to distinguish between high- and low-risk agencies, as both face lawsuits. In Illinois, NIA has limited its coverage for abuse claims to $1 million and stopped offering umbrella coverage for these incidents. Premiums have also skyrocketed.
The Center for Youth and Family Solutions, which cares for over 1,200 foster children, has seen its insurance costs jump from about $45,000 in 2019 to over $1 million today. CEO Patrick Phelan said the agency had to lay off staff and cut services to afford insurance.
Phelan also noted that options for new coverage are nearly nonexistent. Only two insurers remain in Illinois, and neither is accepting new clients. If his agency’s policy isn’t renewed next March, it could be left without insurance.
Durbin added that many agencies forced to switch to high-risk markets, known as “excess and surplus lines,” are paying much more for lower-quality insurance.
Legislative Efforts
Illinois lawmakers have introduced two bills to offer short-term relief. Senate Bill 1696 and House Bill 3138 would grant agencies limited immunity from lawsuits for two years, except in cases of willful or reckless harm. The bills would also create a task force to find a long-term solution by the end of 2026.
Joseph Monahan, a lawyer and insurance expert, called the bills a “start” but criticized the idea of a task force, arguing that the problem is already well known. He suggested shifting foster agency lawsuits to the Illinois Court of Claims to better manage the issue.
Phelan supported forming a task force, believing it could bring together different voices to develop solutions.
A National Problem
The insurance issue is spreading beyond Illinois. Davis said NIA is also cutting coverage in Pennsylvania and Florida. Advocates in New York and Nebraska are raising alarms too. Durbin said her group is working with national advocates and members of Congress to push for a federal response.
Related topics:
