An article in Saturday's Metro section incorrectly identified a Bethesda-based child care advocacy group. The group is Metropolitan Mothers at Work.

Mary Stang and Allegra Smith, who operated day care centers miles apart, are both among the many day care providers in this area who have been forced to shut down home-based operations during the height of an insurance crunch.

For six years, Smith had run a child care program in the house she rented in Anacostia. But this month her landlord said she would have to stop caring for children unless she obtained $500,000 in liability insurance. She was unsuccessful and yesterday she was forced to close.

Stang, who lives in the Village Overlook condominium in Gaithersburg with her family, was forced this month for similiar reasons to close the in-home service where she cared for four children.

Local officials and child care groups lamented the closings, saying private day care operations like those offered by Stang and Smith are critical for the growing number of families in need of child care, but such operations are being jeopardized by insurance problems.

Maribeth Oakes, director of the Children's Foundation, a national family advocacy group, said the difficulty child care providers have had in obtaining insurance has become "a national problem affecting all kinds of day care, both in the homes and at the centers."

Oakes estimated that up to two-thirds of all child care takes place in private homes. And a 1985 study by the Metropolitan Washington Council of Governments showed that only 20 percent of the 124,000 preschool children and 253,000 school-age children in the area are receiving the child care they require.

Oakes added that even if day care providers are able to find a company willing to insure their service, the rising costs of liability insurance may be prohibitive.

Bob Hunter of the National Insurance Consumer Organization, said insurance companies have abandoned the child care industry because of fears of claims over increasing numbers of reported child abuse cases in the country, some of which have involved private day care centers.

"They are overreacting and refusing to write policies at any price. They think these places are being run by a bunch of Jack the Rippers," Hunter said.

Smith said she was rejected by 16 insurance companies. She is still waiting for an answer from two other firms.

Insurance companies "said they just don't carry liability insurance for the day care homes," she said. "My back is up against the wall."

Smith said that, during her search for insurance, she was told that if she could get insurance, it would cost her from between $800 to $1,000 a year, a sum she said she probably would not be able to afford. Smith said she even tried to get a group rate with 30 other child care providers in the District, but was turned down.

It is a problem that Stang understands well. Earlier this year, she was told by the condominium board of directors that her in-home day care service violated the by-laws of the condominium development. Her next door neighbor, Diana Caldas, who also ran an in-home service, closed her center after she was threatened with eviction.

But condominium board President Richard Jones said the group's decision was influenced by the insurance company that holds the policy for the development and threatened to cancel it unless the board took action.

"The insurance company was holding a gun to my head," Jones said. "I'm not antikid, I have two of my own, but we had no choice but to enforce the by-laws."

Stang tried to convince the board of directors at her complex that she would be willing to absorb any additional insurance costs that the company assessed as a result of her day care business.

But board President Jones said the other owners in the condominium were not swayed by her suggestion, prompting Stang and Caldas to file a suit in Montgomery County Circuit Court against the board in an attempt to keep their businesses alive. No action has been taken on the suit.

The growing need for day care in the Washington area is sparking increased interest. Kim Smith of the Bethesda-based group called Washington Area Working Mothers profiled the shortage in a recently published book.

For example, in Montgomery County, Smith said, it was estimated that only 14 percent of the children who need day care are in licensed facilities, public or ptivate. The other 86 percent are in unlicensed or "underground" facilities and homes, Smith estimated.

She said that the problem is especially acute for parents who live in the upper county, where child care options are scarce.

"The further out you get from the core of the city, the less resources there are available to parents," she said.

In the meantime, the parents who have relied on Smith and Stang said they are losing trusted and valuable resources that may be difficult to replace.

Pamela Griffith said her 2-year-old son Terrance has been in good hands during the two months she has left him with Smith.

"I'm going to have to start looking for another sitter, but I hate to do that because she's just so wonderful with him," Griffith said.

Yesterday, as Smith sat with her young charges in the playroom of her house, the only thing that seemed different were the tears welling in her eyes.

"Everyone is saying they're really sorry to lose a good provider, but there's nothing they can do," she said. "But I'm saying they have to do something or they're not going to have anyone to take care of these kids."