Mandated Sexual Molestation Liability (SML) Coverage for Contractors

As a contractor, you are all too familiar with the numerous criteria that must be met in bidding for or securing a contract for your services.  Proof of sufficient insurance coverage is a common requirement; it ensures facilities where you work are protected in the event of your wrongdoing.  A mandate for Commercial General Liability (CGL) insurance is the most familiar to contractors but, depending on who you do business with, an affirmative policy for Sexual Molestation Liability (SML) is becoming common.

Why are SML mandates becoming more common?

Organizations that hire contractors who work with or close to children and vulnerable adults are becoming increasingly sensitive to their potential exposure to allegations of sexual abuse. These allegations can arise from the services provided by contractors and vendors, such as maintenance services, sports programs, camps, catering and transportation – including where services are being provided outside normal working or operating hours.   

Even where the on-site potential for interaction with minors or vulnerable adults is limited, or even theoretically unlikely, such as the provision of on-site maintenance, contractors will very often be required to provide evidence of SML coverage as a condition of being awarded the contract. This means that stand-alone SML coverage is becoming a business necessity for many contractors.

What kinds of organizations are now mandating SML coverage?

Municipalities, counties, and states, as well as school boards, universities, and commercial enterprises, are increasingly requiring contractors to buy standalone SML coverage.  They also specify the policy limits required. The range of activities that have mandatory requirements has broadened as well. These now encompass repair and maintenance (often for single/standalone projects), and the use of the facilities of a municipality/university/school for leisure activities involving minors or vulnerable adults. 

What’s driving this call for SML coverage?

To many contractors, the requirement to purchase this coverage can be perceived as a check-box exercise, but the exposure is real, and organizations are well-advised to mitigate their risk. Procuring insurance coverage isn’t where an organization’s responsibility ends: some organizations also consider how to mitigate the possibility of allegations of negligent hiring, retention, and supervision in their dealings with contractors, so contractors will likely need to be ready to think beyond insurance in terms of contract compliance requirements.  For example, they may also need to consider their liability for these kinds of allegation.

Why is General Liability coverage not always sufficient where issues of sexual molestation are concerned?

A CGL policy – generally – covers bodily injury from abuse.  But many CGL policies don’t cover allegations of negligence; even those that do will have qualified coverage.  Stand-alone SML insurance affirms cover for abuse allegations against the policyholder and those employed by them and covers claims arising from a failure to supervise, negligent employment, and even failure to investigate allegations.

CGL carriers are increasingly excluding sexual molestation from their policies due to the higher frequency of claims and rising severity of cases. Some CGL carriers do not exclude abuse but are silent about SML coverage in their policy. Not having affirmative coverage is an increasingly risky approach because you won’t know if you have coverage until you really need the answer to that question to be “yes.”  It is for this reason many organizations now insist their contractor’s coverage is affirmative about sexual abuse. 

As this type of exposure increases, it is becoming ever more critical for companies, contractors, and vendors to have affirmative, standalone SML protection. Contractors and vendors looking to provide services to or use the facilities of organizations that mandate such protection should review their coverage position with their insurance broker and ensure they have adequate, affirmative coverage in place. 

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