An article yesterday about a congressional hearing on day-care insurance incorrectly spelled the name of Karen E. Solon, one of the witnesses, whose insurance policy for a day-care center in Falls Church was canceled.

Alyce M. Chessnoe told a congressional committee yesterday that she has been providing child care in Burke, Va., for eight years. But this year the care will end, because her insurance has been canceled.

Karen E. Sloan testified that she also will have to close her day care business at her home in Falls Church, because her insurance policy has been canceled.

Members of the House Select Committee on Children, Youth and Families were told that what has happened to Sloan and Chessnoe is happening to day care providers across the nation this summer.

"Child care centers, family care homes, Head Start programs and resource and referral agencies report that their liability policies are not being renewed, that premiums have become prohibitive, that coverage for child abuse claims is unavailable and that policies are being canceled with little or no notification," said committee chairman George Miller (D-Calif.).

"This is a real crisis," said Deborah Phillips of the National Association for the Education of Young Children. The problem is particularly acute because it comes at a time when there is a substantial shortage of day care facilities in many areas, she said.

While the hearing yesterday focused on child care issues, several members of Congress noted that the insurance problem also has affected several other groups, including some municipalities, midwives, the asbestos industry, toxic waste disposal firms and other companies needing environmental liability insurance.

Even the Baltimore YWCA, which operates 11 day care centers for 800 children, three homeless shelters and a range of classes, had its insurance canceled in the spring. With assistance from the Maryland insurance commissioner, the YWCA eventually was able to find other insurance, but at about triple the cost, according to Jean Weaver, the YWCA's day care coordinator.

Joseph S. Silverman, an executive with BMF Marketing Insurance Services, a California insurance brokerage firm, said the problem is that insurance companies are "running scared" because recent court decisions have made it difficult for them to know what they might be held liable for.

"There's a tremendous black cloud hanging out there pulsating that's just waiting to explode," said Rep. J. Roy Rowland (D-Ga.), who suggested that some overall restructuring of the laws governing civil liability might be needed. In addition, Rep. James J. Florio (D-N.J.) suggested, some new federal insurance regulations might be warranted.

Silverman said that the insurance crisis is a result of the huge financial losses that started hitting the insurance industry in 1978. Last year, insurance companies started raising rates and dropping high risk groups in an effort to recover.

Insurance companies put day care centers in the high risk category after the recent highly publicized reports of child abuse. High legal costs and bad publicity prompted that decision, said Silverman.

The number of day care facilities that cannot get insurance remains sketchy, according to yesterday's testimony, although the General Accounting Office has launched a study at Miller's request.

Phillips said her association, which includes owners of child care centers and nursery schools, is receiving about 200 calls a week from businesses that can't find affordable insurance or any insurance at all.

The Maryland insurance commissioner's office said it has had reports that the insurance of 250 day care homes in Baltimore County has been canceled, although state officials said they have not had time to confirm those numbers.

Georgia D. Yocum, chief executive officer of the Lo Marica Insurance Agency in California, testified that no insurance is available for day care businesses with fewer than 12 children run from private homes. She said that some of the larger day care centers have been able to find insurance, but at substantially higher costs.

During the last 15 years, three insurance companies offered specially designed policies for family day care and foster homes, according to Silverman. All three have canceled their coverage. Silverman said his insurance brokerage firm has contacted more than 50 companies and has found only one willing to offer insurance for day care homes. That firm is permitted to do business only in California.

In addition, Silverman said that some insurance companies have canceled homeowner policies for people caring for children in their homes, in spite of the fact that business activities are not covered under the policies. This happened with such frequency in Washington state that the legislature recently passed legislation prohibiting such actions.