Whether your sexual misconduct liability (SML) insurance complements or is compensating for your sexual abuse risk management system is a critical question to ask before you buy or next renew your SML insurance because:
- If your SML insurance is having to compensate for too much, you may want to rethink buying it because not only are there more valuable capabilities than insurance that you should incorporate in your risk management system, but you may also be wasting the money you are spending on SML.
- If your SML insurance complements your sexual abuse risk management system well, you may not need to buy as much SML as you think, so you may be able to spend less on premium and more on better child protection.
The takeaway is that a well-balanced sexual abuse risk management system addresses all the main components of sexual abuse risk, so you need less insurance. Focusing on insurable sexual abuse risks can leave organizations with too little child protection and not enough (and often, no) disruption, reputation, legal, or financial risk management, in which case no amount of insurance will be enough.
What does “having to compensate for too much” mean?
Liability insurance is a risk-mitigating control. It mitigates the financial costs of legal liability imposed on an organization following negligence, for example, not keeping a floor dry, leading to a broken arm, or giving a customer bad advice, leading to a delay or lost opportunity.
The extent to which liability insurance can mitigate an organization’s legal costs heavily depends on how much help the organization gives its insurer-appointed defense attorney. If the organization uses risk management best practices conscientiously, it’s much more likely its defense attorney will be able to defend the organization successfully, and so its liability insurance will be effective.
The opposite, however, is also true. If the organization gives the defense attorney too little or nothing to work with, the attorney can do little or nothing to defend the organization. This is when insurance is potentially at its most stretched and least valuable – when the attorney cannot effectively defend the organization, which in turn means the insurance limits won’t be enough to cover the resulting settlement or jury award. The further away an organization’s risk management is from best practices, the more likely its liability insurance won’t be able to compensate for that gap.
To identify if your SML insurance is trying to compensate for too much, you need to consider, for example:
- Are you focusing on criminal background checks, or do you ensure your entire intake process compares favorably to how a reasonable-sized business approaches intake?
- Are you focusing on one-to-one interactions, or do your policies and procedures and behavior requirements and expectations ensure all grooming behaviors are prohibited and identified, everyone knows how to respond in critical situations, and everyone knows the consequences of failing to adhere to your behavior requirements and expectations?
- Are you checking the boxes for background checks and training, or do you use systematic processes to verify that you address everywhere minors and vulnerable adults are potentially at risk of sexual abuse with appropriate controls, that you understand when those risks change, and that you adapt your controls accordingly?
The more comprehensively your sexual abuse risk management system addresses all the elements of a best-practice approach to managing sexual abuse risk, the better chance you have of preventing sexual abuse and your insurer-appointed defense attorney has of making sure your SML insurance can be effective if you nonetheless have a sexual abuse claim.
If you are not giving your future defense attorney enough support, you are likely wasting premiums because the attorney won’t be able to defend you, and your insurance limits won’t be enough to protect you. In this case, you should divert insurance spending to better controls and systems.
However, managing sexual abuse risk well has benefits that go far beyond effective sexual abuse prevention and protection from large legal settlements or awards.
What is “complimenting your sexual abuse risk management system?”
A comprehensive best practices sexual abuse risk management system addresses many sexual abuse risks, including:
- Prevention – comprehensive prevention controls make sexual abuse much less likely, acknowledging sexual abuse is inherently difficult to prevent;
- Identification – appropriate behavior requirements and expectations make it much more likely sexual abuse won’t go unidentified for prolonged periods, increasing the harm caused to victims and, sometimes, reducing the number of victims;
- Response – organizations with an incident response plan are more likely to respond appropriately at the first suspicion of sexual abuse, preventing, at best, a delayed response and, at worst, allegations of a cover-up;
- Trust – organizations that can convincingly explain the concrete actions they take to back up their stated commitment to minor and vulnerable adult abuse safety are more likely to be trusted to keep children safe;
- Disruption – organizations with an incident response plan are also less likely to see their employee’s lives and their organizations disrupted for potentially extended periods (even years) if sexual abuse is alleged or suspected;
- Reputation – organizations using sexual abuse risk management best practices are convincing when they tell stakeholders how committed they are to child protection, which also ensures careers and organizational reputations are not destroyed if sexual abuse is suspected or alleged;
- Legal – organizations that systematically verify their controls are effective and adapt them to change so they remain effective ensure allegations of negligence are far harder to sustain if the controls are unable to prevent sexual abuse;
- Financial – organizations that manage prevention, legal, reputation, and disruption risks well reduce their short-term legal defense and settlement risk and the long-term risk of revenue drain that typically follows high-profile sexual abuse court cases or settlements.
Insurance complements a comprehensive sexual abuse risk management system when all the components of sexual abuse risk are effectively managed, so your insurer-appointed attorney has the ammunition they need to defend you effectively. They also require less insurance to negotiate an early settlement if abuse is alleged because if you systematically protect children:
- the abuse is identified quickly
- and responded to appropriately and
- the harm caused by abuse is minimized, so
- negligence is more difficult to argue, and
- it’s far more challenging for a plaintiff’s attorney to attack your commitment to child protection
- or assault your reputation and rouse the ire of a jury so
- they are less likely to take you to court when some insurance and other softer targets are available.
So, before you buy or renew your SML insurance, consider whether you have a balanced sexual abuse risk management system, where insurance is complementary, or an unbalanced system, in which case buying insurance may be less important than balancing your system.