Understanding the Abuse Exclusion in Insurance Policies: What It Means for Businesses Working with Children

By Jenny Holly Hansen | WBN News | May 28, 2025

When you operate a business that serves children—whether it’s a daycare, youth sports league, after-school program, or summer camp—you’re not just managing operations. You’re entrusted with the safety and well-being of young people. That responsibility is profound, and so is the need to understand how your insurance policy protects (or doesn’t protect) your organization if something goes wrong.

One clause that often gets overlooked—but can have serious consequences—is the abuse and molestation exclusion.

What Is the Abuse Exclusion?

The abuse exclusion is a clause in many commercial general liability (CGL) policies that excludes coverage for claims arising out of actual or alleged abuse, molestation, or misconduct—often including sexual, physical, or emotional abuse.

This means that if someone files a lawsuit or legal claim alleging that a child in your care was abused (whether by a staff member, volunteer, or even another child), your standard liability policy may not respond to cover legal defense costs, settlements, or judgments.

Why It Matters for Youth-Focused Organizations

For businesses that work with children—like daycares, sports associations, or tutoring centres—this exclusion can leave a dangerous coverage gap. Even with the most stringent hiring practices, background checks, and supervision policies, the risk of an allegation can never be fully eliminated.

And in the eyes of the law, an allegation alone can be enough to trigger a costly legal process. Without the right insurance coverage, your organization could be left to pay for legal defense, potential settlements, and reputational damage—out of pocket.

Real-World Impact Example

Imagine a youth soccer association where a volunteer coach is accused of inappropriate conduct. The association is sued by the child’s family, who allege negligence in supervision and failure to properly screen the coach. If the association’s policy includes an abuse exclusion, the insurer could deny coverage—leaving the organization on the hook for tens or even hundreds of thousands of dollars in legal costs and damages.

What Can You Do?

1. Check Your Policy Carefully
   Don’t assume you’re covered. Work with your insurance broker to read your liability policy’s exclusions—and ask directly whether abuse and molestation claims are covered or excluded.
2. Consider Specialized Coverage
   If your policy excludes abuse-related claims, ask about adding Abuse and Molestation Liability Insurance. This is a separate or supplemental policy designed specifically to cover defense and damages related to abuse allegations.
3. Maintain Strong Risk Management Protocols
   Insurance is only one part of the solution. Ensure your organization:
   • Conducts regular background checks on all staff and volunteers
   • Has clear policies for reporting and responding to concerns
   • Trains staff in appropriate boundaries and conduct
   • Maintains supervision ratios and secure facilities
4. Document Everything
   Keep clear records of your screening processes, training sessions, incident reports, and communications. Documentation can play a key role in both preventing incidents and defending against false claims.

Final Thoughts

If you work with kids, you’ve likely built your business around care, trust, and community. But the reality is, a single allegation—whether founded or not—can threaten everything you’ve worked to build. Understanding the abuse exclusion in your insurance policy is a critical step toward protecting your organization, your team, and the children you serve.

This isn’t just a policy clause—it’s a risk management priority.

If you’re unsure whether your current policy includes this exclusion or if you’d be covered in the event of a claim, I strongly recommend sitting down with a knowledgeable broker who can walk you through your options and make sure there are no blind spots in your coverage.

Let’s make sure care and protection go hand in hand—for your business, and the families who count on you.

Let’s Keep Talking:

Jenny is a business insurance broker with Waypoint Insurance. With 19 years experience, she will well versed in the technical aspects of business coverages.

She can be reached at 604-317-6755 or jholly-hansen@wbnn.news. Connect with Jenny on LinkedIn at https://www.linkedin.com/in/jenny-holly-hansen-365b691b/.  Connect with Jenny at BlueSky: https://bsky.app/profile/jennyhollyhansen.bsky.social

Let’s Meet Up:

Jenny Holly Hansen is a cohost with Chris Sturges of the Langley Impact Networking Group. You are welcome to join us on Thursday’s from 4pm to 6pm at: Sidebar Bar and Grill: 100b - 20018 83A Avenue, Langley, BC V2Y 3R4

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