AN ACT Relating to liability insurance coverage for child care providers; amending RCW 48.88.010, 48.88.020, 48.88.030, 48.88.050, 48.88.060, and 48.88.070; adding new sections to chapter 48.88 RCW; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1. Section 1, chapter 141, Laws of 1986 and RCW 48.88.010 are each amended to read as follows:

((~~Day~~)) Child care service providers have experienced major problems in ((~~both~~)) the availability ((~~and~~)), affordability, and scope of coverage of liability insurance. Premiums for such insurance policies have ((~~recently~~)) grown as much as five hundred percent and the availability and affordability of such insurance in Washington markets has greatly diminished.

The availability of quality ((~~day~~)) child care is essential to achieving such goals as increased work force productivity, family self-sufficiency, and protection for children at risk due to poverty and abuse. The unavailability or unaffordability of adequate liability insurance threatens to decrease the availability of ((~~day~~)) child care services.

This chapter is intended to remedy the problem of unavailable or unaffordable liability insurance of adequate coverage for ((~~day~~)) child care services by requiring all insurers authorized to write commercial or professional liability insurance to be members of a joint underwriting association created to provide liability insurance for ((~~day~~)) child care services.

Sec. 2. Section 2, chapter 141, Laws of 1986 and RCW 48.88.020 are each amended to read as follows:

Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Association" means the joint underwriting association established pursuant to the provisions of this chapter.

(2) "((~~Day~~)) Child care insurance" means insurance coverage against the legal liability of the insured and against loss, damage, or expense incident to a claim arising out of the death or injury of any person as the result of negligence or malpractice in rendering professional service by any ((~~licensee~~)) provider.

(3) ((~~"Licensee"~~)) "Child care provider" means any person or facility licensed to provide day care services pursuant to chapter 74.15 RCW who demonstrates compliance with all applicable state licensing requirements; and any preschool, nursery school, or kindergarten engaged primarily in education work with preschool children, in which no child is enrolled on a regular basis for more than four hours per day that provides evidence of accreditation by the office of superintendent of public instruction or the national association for the education of young children.

Sec. 3. Section 3, chapter 141, Laws of 1986 and RCW 48.88.030 are each amended to read as follows:

(1) The commissioner shall ((~~approve~~)) establish by ((~~July 1, 1986~~)) January 1, 1990, ((~~a reasonable plan for the establishment of~~)) a nonprofit, joint underwriting association for ((~~day~~)) child care insurance, subject to the conditions and limitations contained in this chapter.

(2) The association shall offer child care liability insurance policies to those child care providers eligible for coverage as provided in section 5 of this act by July 1, 1990.

NEW SECTION. Sec. 4. A new section is added to chapter 48.88 RCW to read as follows:

(1) The association shall be administered by a governing board, subject to supervision by the commissioner, and operated by a manager appointed by the board.

(2) The governing board shall be comprised of nine persons. The commissioner shall appoint members to the board as follows:

(a) One member shall have child development expertise;

(b) One member shall represent liability insurance agents and brokers;

(d) Three members shall represent property casualty insurers one of which shall represent the service insurer of the association and one of which shall represent domestic insurers;

(e) Two members shall be recommended by the Washington association for the education of young children; and

(f) One member shall be recommended by the Washington state family day care association.

(3) Board members shall serve for a period of one year or until their successors are appointed. All members of the board serve at the pleasure of the commissioner. All members of the board shall receive no compensation, but shall be reimbursed for all travel expenses as provided in RCW 43.03.050 and 43.03.060.

NEW SECTION. Sec. 5. A new section is added to chapter 48.88 RCW to read as follows:

(1) Except as provided in subsection (2) of this section, a child care provider shall be eligible for coverage:

(a) If the child care provider has consistently maintained its license or accreditation free from revocation for cause, except where the revocation was later rescinded or vacated by appellate or administrative decision; and

(b) After providing evidence of completion of the risk management training program administered by the governing board as provided in section 6 of this act.

(2) Notwithstanding eligibility for coverage, the governing board may reject an initial or renewal application for coverage by a child care provider or may place reasonable limitations on coverage and reasonable conditions for acceptance of an initial or renewal application for coverage by a provider:

(a) If the child care provider has terminated coverage through the association within twenty-four months from the date of initial issuance of coverage by the association unless twelve months have elapsed since termination of coverage by the provider or the provider can show that other coverage was in effect from the date of termination to the date such other coverage was terminated by the insurer for any reason other than nonpayment of premiums;

(b) If a liability claim or judgment against a child care provider has been paid by an insurer within five years of the association's initial issuance of coverage to the provider, provided that the claim or judgment paid reveals practices by the provider that increase the risk of loss to the association or reveals a gross deviation from accepted risk management practices; or

(c) If the association has paid one or more claims on behalf of the provider which payments exceed the provider's annual aggregate coverage limit.

(3) The association shall establish underwriting rules that reflect state licensing standards for family day care homes, mini-day care centers, and day care centers, and accreditation standards for preschool programs administered by the office of superintendent of public instruction and that incorporates by reference local fire safety and public health requirements with which child care providers must comply.

NEW SECTION. Sec. 6. A new section is added to chapter 48.88 RCW to read as follows:

(1) The governing board shall design and provide, directly or by contract, risk management training to child care providers applying for participation in the association.

(2) The risk management training shall include, at a minimum, training and information for child care providers on liability risks and methods of diminishing or avoiding them; and techniques and materials sufficient for child care providers to train their staff.

(3) Risk management training sessions shall be offered at least quarterly during the first year of operation of the association and annually thereafter, and shall be held on days and at times that are accessible for child care providers.

(4) Child care providers participating in the association shall enroll in and complete the risk management training program every fourth year following the year of initial enrollment, as long as that provider continues to receive coverage through the association.

Sec. 7. Section 5, chapter 141, Laws of 1986 and RCW 48.88.050 are each amended to read as follows:

((~~Any licensee may apply to the association to purchase day care insurance, and~~)) (1) The association shall offer ((~~a policy with liability limits of at least one hundred thousand dollars per occurrence~~)) coverage that conforms to the following terms, conditions, and limitations:

(a) Coverage shall be provided for occurrences arising during the policy period;

(b) Coverage shall be offered with varying limits ranging from a minimum of three hundred thousand dollars per occurrence and three hundred thousand dollars annual aggregate to one million dollars per occurrence and one million dollars annual aggregate exclusive of defense costs;

(c) Coverage shall be offered without a deductible and with varying deductibles established by the association which deductibles shall be subtracted from any claim payable by the association;

(d) Coverage may not exclude:

(i) Liability for the off-premise activities of child care providers;

(ii) Products liability;

(iii) Costs of incidental medical care;

(iv) Liability of substitute caregivers in family day care homes;

(v) Liability arising from the loading and unloading of passengers from vehicles;

(vi) Third-party property damage caused by children in the care of a provider;

(vii) Liability of the provider for bodily injury inflicted by pets or animals on the provider's premises subject to reasonable restrictions to ensure the safety of children in the care of the provider;

(viii) Liability of the provider for the release of a child in the care of the provider to a noncustodial parent unless the provider had actual knowledge that such release was improper;

(e) Optional coverage shall be offered that insures against the liability of officers and directors of child care providers; and

(f) Optional coverage shall be offered for vehicles used by the child care provider in the course of his or her own business.

(2) The governing board shall determine the premium rates for association coverages using reasonable actuarial techniques that reflect anticipated loss experience, expenses, and investment income. To the greatest extent possible, consistent with sound actuarial principles, the governing board shall rely upon the loss experience of the association and the overall loss history of child care providers in those states whose legal and child care provider characteristics closely parallel Washington state characteristics. The rates shall be reasonable in relation to the coverage provided, the risk underwritten, and the expenses in providing the coverage. The ((~~commissioner shall require the~~)) governing board shall use ((of)) a rating plan for ((~~day~~)) child care insurance that permits rates to be modified for individual ((~~licensees~~)) providers according to the type, size and past loss experience of the ((~~licensee~~)) provider including any other difference among licensees that can be demonstrated to have a probable effect upon losses.

(a) Premium rates shall be set as a fixed annual amount for each full time equivalent child the child care provider is licensed to serve.

(b) All rates and rate schedules shall be submitted to the commissioner for approval.

Sec. 8. Section 6, chapter 141, Laws of 1986 and RCW 48.88.060 are each amended to read as follows:

By December 1, ((~~1987~~)) 1991, and annually thereafter, the commissioner shall file or cause to be filed a report to the legislature detailing the operations, finances, claims, and marketing experience of the association.

Sec. 9. Section 7, chapter 141, Laws of 1986 and RCW 48.88.070 are each amended to read as follows:

The commissioner may adopt all rules necessary to ensure the efficient, equitable operation of the association((~~, including but not limited to, rules requiring or limiting certain policy provisions~~)).

NEW SECTION. Sec. 10. A new section is added to chapter 48.88 RCW to read as follows:

Neither the participation by insurers, the establishment of rates, forms, or procedures for coverages issued by the association, nor any joint or collective action required by this chapter or the state of Washington shall be the basis of any legal action, civil or criminal liability or penalty against the association or insurers who are members either jointly or separately.

NEW SECTION. Sec. 11. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 12. This act is necessary for the immediate preservation of the public peace, health, and safety, the support of the state government and its existing public institutions, and shall take effect immediately.