When I talk with pastors about the legal, liability and financial challenges facing their churches in today’s increasingly litigious environment, they often ask, “But we do everything to the best of our ability. As long as that is true, why should anyone try to sue us?” The answer to this question may be the most important reason why churches need liability insurance.
The issue is whether or not to take responsibility for the actions of the individual members of the congregation who are acting on behalf of the church, knowing that the members are probably also covered by some type of personal insurance such as homeowners or car insurance. Each church must carefully consider its position.
In the 1970s a professor wrote an article about legal immunity for churches for a journal which later was reprinted by a Christian organization. I still have a copy because of the argument he made: The immunity of churches can exist only if the members, officers, and trustees take responsibility for what they do in the service of the church. It is not enough for the church alone to have insurance against the consequences of something a church member does. The member must be willing to accept responsibility for his actions. Without this member willingness to accept responsibility, the courts have ruled that a church cannot have immunity for the members’ actions, for the church has not taken responsibility for them. If the church wants immunity from damage suits brought by individuals against them, the courts demand that the church take responsibility.
This is in essence what insurance does; it takes responsibility for the member. To hold the church responsible for the acts of its officers/directors/trustees/members means in effect that there is no immunity, that the church’s immunity depends on the will of the congregation to act responsibly. Therefore, the argument goes, the most the courts would allow if an officer/director/trustee/member is covered by the church, and especially by insurance, is personal injury, but the member him or herself retains responsibility.
Immunity would apply only to property damages. So if the court decides that a church should be held responsible for some wrongful act on the part of a member/officer/employee/volunteer, it should only compensate the injured party for property damages, not personal injuries, unless the court decides otherwise.
Personal injuries could include physical/mental anguish/injury, pain and suffering, emotional distress, or any other damages incidental to the particular injury or occurrence. But the court, depending on the law where you live, might decide to change that opinion.
The opinions of the courts are different than they were even ten years ago; the courts no longer look favorably upon churches, and sometimes even large, old and venerable non-profit corporations and organizations are denied immunity unless they have taken significant steps to insure compliance with both local and national laws relating to non profit organizations.
This attitude is based on the concept of "good governance," and whether there is any indication that the church is at least attempting to comply, either by consulting professionals, implementing risk management programs, or purchasing insurance. This attitude toward nonprofits is spreading as boards and CEOs of nonprofit organizations face potential liability for both mistakes and bad faith.
The sad reality is that many of these lawsuits come as a result of the following four issues:
- Inadequate training and orientation for the staff and volunteers;
- Lack of documentation including records of training, program evaluations and job descriptions;
- Poor choice of staff or volunteers; and
- Failure to check references or a lack of other qualifications.
A church's/non-profit’s liability is defined as the responsibility to pay compensation or monetary compensation for direct or indirect damage or injury caused by negligence, carelessness or default.
- Negligence: failure to perform the duties required. It refers to failure to act prudently in the circumstances as they reasonably appeared to the negligent person.
- Carelessness: the failure to exercise ordinary care and diligence.
- Default: breaking a promise.
Negligence liability arises either out of professional negligence or from an obligation of care arising by contract or the status of the relationship between the parties (as in an employer-employee relationship). It includes cases where no consideration has been given.
Liability insurance covers a variety of claims:
- property damage
- bodily injury
- personal injury (slander)
- a directors and officers liability
These three areas of coverage can be provided by a nonprofit or employer's liability policy. Directors and officers’ liability is the liability of the board for its decisions and actions.
So what are the questions or issues for boards and committees to review?
- Does the board believe a member who serves on the board, as an officer, committee member, or on the staff, is covered by the policy when they serve? Some state law prohibits employees from coverage under the policy without an endorsement or exclusion. An example of this requirement is a school district that has a policy written in a state that prohibit the employee from coverage under the liability insurance unless it is purchased. It is my understanding that no insurance company will accept an unendorsed application for liability insurance in that particular state because the risk manager would find himself being sued for not obtaining coverage for the employees who are working for the organization.
- If board members or others believe the church is or should be liable for the actions of individual members, do they require the board to make sure that the membership, including directors, officers, committee members, and all volunteers, receive training on the church’s mission statement, its policy manual, and its code of conduct?
- Do they require training in skills, such as conflict resolution, effective communication or consensus building? To adequately prepare employees and members, the church needs to produce documentation of training including sign-in sheets, sign-out sheets, and evaluations.
- Are there requirements for skill demonstration in a live environment for volunteer workers, under the supervision of a professional? Is the board satisfied that they have a system in place to document progress, failure, and potential employee/volunteer dismissal? Are they satisfied that they have an adequate reporting system in place for such violations?
- Does the insurance company want to insure the church, if the church denies it is responsible for the actions of individual members?
Here at Christian Insurance Services, we base our premium rates not just on the financial condition of the church but also on the answers given to these questions. Without answers, our underwriters cannot arrive at premium pricing.
If the church cannot answer these questions, our underwriters refuse to quote a rate until they are answered. In some cases, we turn down coverages for these and other reasons, and when we do that, it is for the good of the churches. If we did not act on the basis of the answers received to our underwriting questions, then one day, a church that relied on us to provide insurance protection, would have received a very unpleasant surprise: no claim payment because the church didn’t take responsibility for itself, and then they would have found themselves in the middle of an expensive lawsuit.
These situations arise from a number of sources. The first is church leadership who believes that what happens in the church is done by the individual church member and nothing else. They do not take into account that all of the actions of the member are covered, and the member is covered by the liability insurance, assuming that the policy provides that coverage. Unfortunately, a lot of times, there are gaps, exceptions, and exclusions on policies that preclude this coverage, especially in California or in states like it.
The second source is pastoral misinformation. In some cases, the pastor receives church insurance when someone is sued. When they receive an insurance settlement, the church pastor believes that the money received is from the insurance company, so they refuse to pay any portion of the settlement proceeds to the church member who was injured. Other times, these pastors will not talk to the insurance company, so the insurance company refuses to pay because there is no contact with the insured. In some instances, the church will not participate in defending a suit, on the grounds that it is not responsible for what happened. In other cases, a church pastor will fail to inform the members that the church provides insurance coverage for its employees and volunteers, and then will complain to the insurance company that they do not make claim payments promptly when they are asked to do so.
The third issue relates to church membership. In many cases, church members become angry enough to file a lawsuit against their own pastors or their church staff members, and they are willing to spend the time, money, and effort to do whatever is necessary to win. In these cases, the only purpose of the lawsuit is to expose the church leadership for its mismanagement or control over their own affairs. Members of the church who file lawsuits may hire attorneys who do not always understand that the insurance company may or may not cover certain types of claims.
While it is not always possible to predict how courts will react to a claim, we find that they tend to