Table of Contents

Risk Management and Insurance

Types of Regulated Child Care in New York State

Risk Management

Business risk falls into three main categories: 1) business risks, such as damage to property, 2) personal risks related to health and injury, 3) legal risks, including broach of contracts or things that put you at a risk of being sued. Business risk is ultimately borne by the business owner(s) or the corporation. There are many ways for business owners to limit risk and personal liability. It is important to develop a risk management plan that specifies on-going maintenance of equipment and the environment, and identifies when (and which) safety drills are conducted and what you will do in case of emergency. While the business’ legal structure can serve to limit personal liability, not all accidents can be prevented and liability insurance helps to transfer liability when it comes to the unexpected. Business policies, procedures and contracts are also a part of risk management.

Creating a Risk Management Plan

Create a risk management plan that includes required safety drills, on-going inspection of toys and maintenance of the facility and equipment. In their article, Ready or Not? Evaluating Your Family Childcare Risk Management Plan (RMP), the McCormick Center for Early Childhood Leadership, includes steps for evaluating a risk management plan and a Risk Summary and Coverage Checklist for preschools. In addition to monitoring the environment and minimizing slips and falls, minimizing risk requires complying with federal and state requirements for the child care industry and having insurance to help cover the unexpected. If there are employees, it is important that the business follows labor and employer responsibilities re: immigration, occupational safety, wages, hours and taxation.

Federal and State Requirements

Business regulations for New York State are outlined in the Starting a Small Business in New York State.

Child Care Licensing Regulations

Child care businesses in New York must adhere to the licensing requirements and regulations put forth by the Office of Children and Family Services. Licensing and registration requirements require confidentiality of child information, disallow corporal punishment, indicate that child care staff are mandated reporters of suspected or known child abuse and neglect. There are also health and safety training and requirements,  and specifics regarding the administration of medication to children in care. Child records and emergency information must be kept up to date and the business must have emergency plan, evacuation diagrams and practice, and document, regular emergency drills.

Discrimination is Illegal

Federal and New York State Human Rights Law taken together forbid discrimination on the basis of age, race creed, color, national origin, sexual orientation, military status, sex, disability, pregnancy-related condition, domestic violence victim status, genetic predisposition or carrier status, familial status or marital status. Federal law also requires that women and men receive equal pay for the equal work in the same workplace and prohibits employers from workplace harassment. Further, licensing regulations also state that child care services must not be refused to a child solely on the basis of developmental delay or disability or having been diagnosed as having human immunodeficiency virus (HIV), HIV-related illness or acquired immune deficiency syndrome (AIDS). Whenever possible, reasonable modifications are expected to be made to accommodate children with special needs.

Americans with Disabilities Act (ADA)

Child care businesses must provide any medication, treatment or remedy as required under the provisions of the American’s with Disabilities Act (ADA) and be sure to provide toys and equipment that promotes the cognitive, educational, social, cultural, physical, emotional, language and recreational development and meets the needs of all children in care. Learn more about the ADA from the U.S. Department of Justice, Civil Rights Division’s technical assistance page at ADA.gov.

Business Insurance

Child care regulations in New York State do not require business owners to carry insurance, regardless insurance is an important component of any risk mitigation plan. While business structure provides some protection from liability, purchasing insurance helps transfer the liability and reduce any potential costs incurred by the business or business owner. Insurance can help to cover costs due to injury or loss related to crime or damage to property or equipment. Slips and falls are a common cause of injuries experienced by customers and employees of the most common cause of workers compensation and general liability claims. Back injuries are also common for child care workers who lift children and equipment throughout their work day. Homeowner’s and renters who operate a family or group family child care program will probably need coverage specifically for the child care business. If the home-owners policy covers child care, be sure the insurance company knows child care is being provided rather than surprising them with any claims – and perhaps yourself, by not being covered after all.

General Liability Insurance

General liability insurance helps to cover costs, protecting the business and/or business owner if sued over a particular incident or outcome and can help pay for attorney and settlement fees. It protects the business from liability for property damages and injuries, including emotional distress, caused to staff and employees, a child, parent or other visitor who is not an employee. General liability insurance should cover libel, slander, and copyright infringement, but it doesn’t cover professional errors or negligence.

  • Child care providers face the risk of being sued for allegations of physical abuse and neglect, and sexual molestation of children in their care. Coverage for these claims must be purchased separately, in addition to general liability insurance and can often be purchased as an endorsement to an existing general liability policy for an additional premium.
  • Read and compare the details of any plan under consideration. If the general liability insurance doesn’t include coverage for property damage, ask about a business owners policy that should include both liability and property losses.
  • Consult a licensed insurance agent to make sure to get all important coverage for the business location.
Recommended Insurance Coverage Limits Family and Group Family Child Care
  • Homeowner’s policies do not protect accidents, injuries or lawsuits that occur in home-based child care businesses. If coverage is wanted, separate business liability insurance must be purchased.
  • Recommended coverage limits for family and group family child care;
    $1M per occurrence (or for each incident) and $2M aggregate (or the total a month that the policy will pay out in a single year).
Recommended Coverage Limits for Centers and School-age Programs
  • Insurance offered on Shared Source ECNY for nonprofit and for-profit centers, includes Corporal Punishment and Abuse and Molestation coverage options and general liability limits of $1,000,000 each occurrence/$3,000,000 aggregate.
  • In addition, centers and school-age programs may want to consider employee benefits liability, employee practices liability, professional liability & directors and officers liability coverage or additional liability coverage depending on the situation.
  • Tom Copeland publishes a permanent Child Care insurance Directory that lists companies that offer insurance to family child care providers. Also of interest is his Ten Questions to Ask Before You Purchase Family Child Care Business Liability Insurance.

Employer Insurance Obligations

Employer insurance obligations have been discussed prior, but to summarize, obligations include Unemployment Insurance, Worker’s Compensation, Disability Insurance and New York State Paid Family Leave. Additionally, employers may choose to offer health insurance or a flexible spending account benefit for employees to purchase their own medical insurance. Learn more about business insurance from New York State and if the business doesn’t offer health care coverage, help employees find medical insurance through the New York State Health Plan Marketplace.

Employment Practices Liability Insurance

We might think it won’t happen to me, but so many people use the legal system against each other and their place of employment. Employment practices liability insurance can help pay for legal defense costs and provide protection from claims such as harassment, wrongful termination or discrimination by current or prior employees.

Directors and Officers and/or Management Liability Insurance

Businesses that operate under a board of directors will want to purchase directors and officer’s liability insurance. This insurance protects board members or officers from personal liability for business losses if they are sued by any employee, customer, vendor or other party related to the business.

Automobile Insurance

Commercial automobile insurance will be required for centers and school-age child care businesses to transport children. Family and group family providers may be able to secure coverage for transporting children under their personal automobile insurance. Commercial automobile insurance can be costly and programs often choose to ask parents to support transporting children for field trips. It is common to request verification that personal automobile insurance meets minimum limits established by the business. If a home-based child care program charges for transportation, commercial auto insurance will be required to provide protection for anyone driving in relation to business.

  • Check with the business insurer to be sure of necessary limits and costs that they may require.
  • At the time of this writing, New York state law requires that all children under 4 years of age be transported in certified child safety seats and that adapted restraint systems are used by children up to their 8th85
  • New York State posts a permanent web page of safety seat fitting stations that are available across the state.
Other insurance
  • Some businesses and business owners like to carry life insurance.
  • Make sure you have any lender or investor-required insurance.

Additional Resources

Building Access to Child Care Project (BACC) and Early Childhood Business Alliance (ECBA)
Early Childhood Career Development
NYS Child Care Licensing Process
Creating a Business Plan
Business Structure
Risk Management and Insurance
Financial Management and Record Keeping
Taxes
Child and Adult Care Food Program (CACFP)
Marketing
Curriculum Planning
Program and Employment Records and Forms
Working with Families: Communication, Contracts and Help Paying for Child Care
Caregiver Qualifications, Training and Professional Development Requirements
Quality Improvement
Professional Organizations
Frequently Asked Questions – FAQs
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