‘Spiraling out of control’: Wave of sexual assault claims is creating insurance crisis for public schools, local agencies

Six years ago, a new California law opened the gates for victims of long-ago childhood sexual assault to sue the public entities they say had failed to keep them safe — schools, juvenile detention centers, shelters for foster children and more.

Assembly Bill 218 significantly expanded the statute of limitations for filing a sexual assault lawsuit against a public entity and provided a new chance for sexual assault victims to seek justice and compensation.

But public officials say it is sowing a financial crisis for school districts, county governments and other public agencies who are now facing a wave of claims alleging sexual assault by their employees over the past several decades.

The claims are costing agencies millions of dollars not only in lawsuit settlements and other legal costs but also in increased insurance costs. AB 218’s dramatic expansion of the statute of limitations has shaken the insurance market and helped fuel an exodus of insurers out of California, leaving public agencies here with sparse options that are much more expensive.

With insurance so limited, costs for these sexual assault claims are often being paid out of school districts’ or counties’ general funds — which means less money to pay for schools and public services like firefighting, sheriff’s law enforcement, homelessness programs, parks, elections and more.

Public agencies aren’t saying victims should be denied compensation. But they want the state to establish limits to how much plaintiffs and their attorneys can demand of agencies; currently there are none.

“We’ve just reached this point where everything is just spiraling out of control,” said Ben Adler, spokesperson for the nonprofit California State Association of Counties.

Missing records, defunct insurers

AB 218, championed by former San Diego state Assemblymember Lorena Gonzalez, raised the age limit for filing a childhood sexual assault lawsuit against a public agency from 26 to 40.

It also opened a three-year “lookback” window, which closed in December 2022, during which anybody with allegations of childhood sexual assault, no matter their age, could file a claim.

The settlements and judgments resulting from AB 218 claims have already reached the billions. Most notably, Los Angeles County settled in April with about 6,800 people with sexual assault allegations for $4 billion, the largest settlement in the county’s history — the county will have to keep paying it out every year through 2051.

AB 218 is expected to cost school districts and charter schools statewide $2 billion to $3 billion, according to a January report from the state’s school auditing agency, called FCMAT.

The AB 218 claims have already overwhelmed some small public entities, whose entire operating budgets may be smaller than the amounts they are required to pay out.

Adding to agencies’ stress is that many of these allegations are difficult for them even to investigate, much less defend.

Because some allegations are several decades old, agencies often no longer have records for the adults and children who were involved, in some cases even records to show that a certain child was ever in their care. People who may have witnessed the alleged abuse may no longer be alive.

Some claims coming in are so old that districts don’t know who their insurance carrier was at the time the alleged assault happened. In other cases, the carrier they had no longer exists.

“You have to find that and you have to hope they’re still in business, and you have to hope the amount of coverage at that time is still a viable amount of settlement for today,” said Steven Salvati, executive director for risk management at the San Diego County Office of Education.

Hits to public budgets

The San Diego County government is facing at least 240 sexual assault lawsuits and claims, the vast majority of which were only made possible by AB 218, spokesperson Tim McClain said.

The claims allege sexual assault within the county’s juvenile detention and foster care facilities. Most are still pending, while 11 have been dismissed or concluded in favor of the county.

“We prioritize the care of all children and youth in our care and have comprehensive training, rules, procedures, and additional oversight to ensure the safety of youth in its care,” McClain said in an email. “The county is thoroughly investigating and will work through the legal system to resolve these claims and do what is right for anyone who has been harmed.”

San Diego County is self-insured against these kinds of claims, meaning any settlements and judgments will likely come out of the county’s general budget.

The county has insurance through a risk pool for California public entities called PRISM, but it is largely self-insured on AB 218 claims because there was no PRISM coverage before July 1, 2023, McClain said.

Even if PRISM coverage were at play, the county still has to pay up to $5 million before that coverage kicks in, McClain said.

San Diego Unified School District, meanwhile, has received 32 sexual assault claims alleging abuse by teachers and other adult employees from the 1960s to this year, spokesperson James Canning said in an email.

The district has so far paid $6.5 million in settlements for seven closed claims. It is facing another 13 open claims, and most of those were only able to be filed because of AB 218.

San Diego Unified anticipates several of those claims will be at least partly covered by insurance. For a couple cases from 1976 and 1983, the district is trying to find out who its insurance carrier was for those time periods.

‘Two ways, backwards and forwards’

The law has not only raised costs for school districts and other agencies that must pay settlements. It has also raised costs for public entities in general — regardless of whether they are facing any claims.

Many public agencies acquire insurance coverage by buying into a risk pool, in which agencies band together to diffuse risk across a large number of members.

Agencies in a risk pool share insurance costs as well as the costs resulting from claims from any one member. So when the pool is paying out for more claims, it can raise costs for everybody in the pool.

Poway Unified School District, for example, has contributed an additional $2.5 million in the last five years to the county’s risk pool for school districts to help pay for AB 218-related claims, said associate superintendent Eric Dill — even though the district itself has not had any claims yet in which it had to pay a settlement or judgment. (The district has three active claims that are still in process.)

Then, on top of that, Dill estimates that Poway Unified has paid $900,000 in increased insurance costs to cover anticipated future AB 218 claims.

“It’s affecting us two ways, backwards and forwards,” Dill said.

The district enacted more than $10 million in budget cuts for this new school year, including cutting more than 20 educator jobs such as special education teacher positions. The district attributes the budget cuts to various financial pressures, including the higher insurance costs as well as lower state funding, declining enrollment and increased costs of supplies.

To Michelle O’Connor-Ratcliff, the president of the Poway Unified School Board, it’s unfair to take away from today’s schoolchildren to pay for alleged wrongdoing that preceded them by decades.

“Today’s taxpayers should be funding today’s children,” O’Connor-Ratcliff said.

A brewing insurance crisis

Experts say AB 218 is one of the main factors driving a statewide insurance crisis for school districts and local governments, one that has accelerated in the past five years since the law’s passage. Insurers are less willing to cover such entities because of the uncertainty caused by AB 218.

“If they feel like they can’t actually figure out what the cost is going to be, (insurers) just leave because they don’t know what to charge you,” said Dave George, CEO of the Schools Excess Liability Fund or SELF, a risk pool that includes about half of California’s 1,000 school districts.

Insurers are leaving California; 85% of California’s reinsurance market has vanished, the January report from FCMAT found. With a smaller market, the few insurers remaining have significantly raised their prices and become more selective in what and how much they will cover. With few options domestically, public entities are looking overseas for insurers, which are also more expensive.

San Diego County’s risk pool for school districts and charter schools has seen its insurance premium and other costs increase by 70% in the last four years, said Salvati, the risk management director for the office of education. The pool has received 17 lawsuits filed under AB 218 in the last five years, he said.

Meanwhile, SELF has seen its insurance costs quadruple since 2020, George said. The number of insurers that provide coverage for the pool has shrunk from nine in 2020 to two this year, he added.

‘A whole cottage industry’

Having a financial impact on public agencies was part of the point of AB 218, because it’s about holding agencies accountable, said former Assemblymember Gonzalez.

“If you want to stop the cycle of abuse from happening, you’ve got to get people to take the allegations seriously,” she said.

But Gonzalez said the agencies’ financial concerns about the AB 218 claims are valid. She shares concerns that plaintiff attorneys may be exploiting AB 218 for financial gain. Several law firms have been advertising heavily to potential plaintiffs.

“We didn’t foresee a whole cottage industry of attorneys taking advantage of this to make themselves rich,” Gonzalez said. “That’s not what this was supposed to be about.”

One solution that public officials and public entity risk pool leaders have suggested is setting caps on the size of settlements and judgments, and on the percentages that can go toward attorneys’ fees.

Setting caps would help make claim costs more manageable and predictable, which might help encourage insurance carriers to return to California, George said.

“How do we sort of cap the costs in a way that still compensates victims but doesn’t make the financial side so volatile to public entities?” George said.

The state auditing agency, FCMAT, recommended possible ways to help public entities pay for claims costs.

One suggestion is to create a victims compensation fund that would be funded by assessments on liability insurance premiums paid by agencies, similar to the one that Congress created to provide cash benefits for 9/11 victims and their families. That 9/11 victims fund set caps on individual award amounts.

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