SB 3164: Child Welfare Service Organizations; Tort Liability; State Contracts

A BILL FOR AN ACT

RELATING TO CHILD WELFARE SERVICE ORGANIZATIONS.

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

     SECTION 1.  The legislature finds that child welfare service organizations provide essential, mandated services to children and families in partnership with the State, that otherwise would have to be performed by the State itself.  The legislature further finds that these child welfare service organizations are now facing extreme challenges in securing general and professional liability insurance coverage.  Many insurance carriers have withdrawn from the market, reduced coverage limits, or imposed drastically higher premiums, making coverage either unavailable or unaffordable.

     The legislature additionally finds that without adequate liability insurance coverage, child welfare service organizations cannot maintain state contracts or deliver critically needed services.  The legislature also finds that rising insurance costs combined with stagnant contract reimbursements threaten the financial sustainability of these child welfare service organizations.  These circumstances risk disrupting services provided by child welfare service organizations under contract with the State, which would leave vulnerable children and families without necessary resources and place an unsustainable burden on state agencies.

     The legislature finds that the underlying cause of the crisis faced by these child welfare service organizations is the growing frequency and severity of lawsuits involving child-related tragedies.  Litigation strategies often include naming child welfare service organizations in lawsuits even when they are not found responsible, resulting in nuclear judgments that destabilize the insurance market.  As a result, child welfare service organizations are increasingly forced to rely on excess and surplus lines of insurance coverage, which offers reduced liability protection at significantly higher costs.

     The legislature believes that if this issue is not addressed, child welfare service organizations may withdraw from this type of work, creating significant gaps in services and straining state agencies that are tasked with filling those gaps.  The legislature further finds that legislative and administrative solutions are needed to ensure that child welfare service organizations can obtain reasonable and sustainable liability insurance coverage, thereby safeguarding the continuity of essential services for children and families across the State.

     Accordingly, the purpose of this Act is to provide certain limited liability protections for nonprofit child welfare service organizations that contract with the State to provide child welfare services to children and families by eliminating joint and several liability for child welfare service organizations by limiting liability to each organization's percentage share of damages.

     SECTION 2.  The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

CHILD WELFARE SERVICE ORGANIZATIONS

     §   -1  Definitions.  As used in this chapter:

     "Child welfare service organization" means a nonprofit organization that has entered into a contract with the department of human services to provide child welfare services to children and families.

     §   -2  Child welfare service organization as a tortfeasor; abolition of joint and several liability.  (a)  Notwithstanding any other law to the contrary, in any case in which a child welfare service organization is determined to be a tortfeasor along with one or more other tortfeasors, the child welfare service organization shall be liable for not more than that percentage share of the damages attributable to the child welfare service organization.

     (b)  For the purposes of this section, the liability of a child welfare service organization shall include its vicarious liability for the acts or omissions of its officers, agents, and employees."

     SECTION 3.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 4.  This Act shall take effect upon its approval.

Report Title:

Child Welfare Service Organizations; Tort Liability; State Contracts

Description:

Eliminates joint and several liability for child welfare service organizations by limiting liability to each organization's percentage share of damages.  (SD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

A BILL FOR AN ACT

RELATING TO CHILD WELFARE SERVICE ORGANIZATIONS.

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

     SECTION 1.  The legislature finds that child welfare service organizations provide essential, mandated services to children and families in partnership with the State, that otherwise would have to be performed by the State itself.  The legislature further finds that these child welfare service organizations are now facing extreme challenges in securing general and professional liability insurance coverage.  Many insurance carriers have withdrawn from the market, reduced coverage limits, or imposed drastically higher premiums, making coverage either unavailable or unaffordable.

     The legislature additionally finds that without adequate liability insurance coverage, child welfare service organizations cannot maintain state contracts or deliver critically needed services.  The legislature also finds that rising insurance costs combined with stagnant contract reimbursements threaten the financial sustainability of these child welfare service organizations.  These circumstances risk disrupting services provided by child welfare service organizations under contract with the State, which would leave vulnerable children and families without necessary resources and place an unsustainable burden on state agencies.

     The legislature finds that the underlying cause of the crisis faced by these child welfare service organizations is the growing frequency and severity of lawsuits involving child-related tragedies.  Litigation strategies often include naming child welfare service organizations in lawsuits even when they are not found responsible, resulting in nuclear judgments that destabilize the insurance market.  As a result, child welfare service organizations are increasingly forced to rely on excess and surplus lines of insurance coverage, which offers reduced liability protection at significantly higher costs.

     The legislature believes that if this issue is not addressed, child welfare service organizations may withdraw from this type of work, creating significant gaps in services and straining state agencies that are tasked with filling those gaps.  The legislature further finds that legislative and administrative solutions are needed to ensure that child welfare service organizations can obtain reasonable and sustainable liability insurance coverage, thereby safeguarding the continuity of essential services for children and families across the State.

     Accordingly, the purpose of this Act is to provide certain limited liability protections for nonprofit child welfare service organizations that contract with the State to provide child welfare services to children and families, including:

     (1)  Prohibiting contracts between child welfare service organizations and the State from including state indemnification clauses or requiring the State to be an additional insured under child welfare service organization insurance policies; and

     (2)  Eliminating joint and several liability for child welfare service organizations by limiting liability to each organization's percentage share of damages.

     SECTION 2.  The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

CHILD WELFARE SERVICE ORGANIZATIONS

     §   -1  Definitions.  As used in this chapter:

     "Child welfare service organization" means a child welfare service organization that is contracted with the department of human services to provide services to children and families.

     §   -2  Child welfare service organizations; state contracts; indemnification; additional insured.  (a)  Any contract entered into between a child welfare service organization and the State shall not require that the child welfare service organization defend, indemnify, and hold harmless the State and its officers, agents, and employees from any claims, suits, costs, or attorney's fees.

     (b)  Any insurance policy obtained by a child welfare service organization shall not require that the State, and its officers, agents, and employees, be named as an additional insured.

     §   -3  Child welfare service organization as a tortfeasor; abolition of joint and several liability.  (a)  Notwithstanding any other law to the contrary, in any case in which a child welfare service organization is determined to be a tortfeasor along with one or more other tortfeasors, the child welfare service organization shall be liable for not more than that percentage share of the damages attributable to the child welfare service organization.

     (b)  For the purposes of this section, the liability of a child welfare service organization shall include its vicarious liability for the acts or omissions of its officers, agents, and employees."

     SECTION 3.  This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

     SECTION 4.  This Act shall take effect upon its approval.

Report Title:

Child Welfare Service Organizations; Indemnification Clauses; Additional Insured; Tort Liability; State Contracts

Description:

Prohibits contracts between child welfare service organizations and the State from including state indemnification clauses or requiring the State to be an additional insured under child welfare service organization insurance policies.  Eliminates joint and several liability for child welfare service organizations by limiting liability to each organization's percentage share of damages.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

STAND. COM. REP. NO. 2632

Honolulu, Hawaii

RE:     S.B. No. 3164

        S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2026

State of Hawaii

Sir:

     Your Committees on Health and Human Services and Commerce and Consumer Protection, to which was referred S.B. No. 3164 entitled:

"A BILL FOR AN ACT RELATING TO CHILD WELFARE SERVICE ORGANIZATIONS,"

beg leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Prohibit contracts between child welfare service organizations and the State from including state indemnification clauses or requiring the State to be an additional insured under child welfare service organization insurance policies; and

     (2)  Eliminate joint and several liability for child welfare service organizations by limiting liability to each organization's percentage share of damages.

     Your Committees received testimony in support of this measure from Parents And Children Together, Catholic Charities Hawaiʻi, Child and Family Service, SanHi Government Strategies, and three individuals.

     Your Committees received testimony in opposition to this measure from the Department of the Attorney General and Hawaii Association for Justice.

     Your Committees received comments on this measure from the Insurance Division of the Department of Commerce and Consumer Affairs.

     Your Committees find that over the last several years, child welfare service providers have faced increasing difficulty in accessing and affording liability insurance coverage, which is critical to the operation of child welfare and foster care programs, as it functions as a primary risk-management mechanism and financial safety net against claims arising from the provision of services.  The underlying cause of this crisis is the growing frequency and severity of lawsuits involving child-related strategies in which child welfare service organizations are named as defendants and held jointly and severally liable, meaning they would need to pay the full amount of any judgment awarded, regardless of their proportionate share of fault if other defendants are unable to satisfy their share of the judgment.  Your Committees further find that ensuring that child welfare service providers are able to obtain and maintain liability coverage preserves the financial capacity necessary to respond to claims, compensate victims where liability is established, and maintain continuity of essential services for keiki currently receiving care.  This measure supports child welfare service organizations to obtain reasonable and sustainable liability insurance coverage and safeguards the continuity of essential services for children and families across the State.

     Your Committees note the concerns raised in testimony in opposition to this measure from the Department of the Attorney General that eliminating the indemnification and insurance requirements for state contracts with child welfare service organizations places a financial burden on the State for the negligence or wrongdoing of the employees of a contracted service provider.  In general, the system of personal injury liability disfavors allowing entities who cause harm through the negligence or wrongdoing of their own employees to avoid the financial consequences of that negligence or wrongdoing.  If the requirement for indemnification of the State by the providers is eliminated, then the State, and ultimately the taxpayers, will bear the burden of fully compensating the harm and loss caused by the service providers.  Therefore, amendments to this measure are necessary to address this concern.

     Your Committees have amended this measure by:

     (1)  Deleting language that would have prohibited contracts between child welfare service organizations and the State from including state indemnification clauses or requiring the State to be an additional insured under child welfare service organization insurance policies;

     (2)  Amending section 1 to reflect its amended purpose; and

     (3)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the records of votes of the members of your Committees on Health and Human Services and Commerce and Consumer Protection that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 3164, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 3164, S.D. 1, and be referred to your Committees on Ways and Means and Judiciary.

Respectfully submitted on behalf of the members of the Committees on Health and Human Services and Commerce and Consumer Protection,