Church Liability Insurance: One Step, Huge Relief
By Raul Rivera
It is unfortunate that lawsuits against churches are at an all-time high. If you were to do a simple Google search on “lawsuits against churches”, you would get more than 37 million search results. When we hear the stories of churches being sued, it is easy to think, “That will never happen to my church.”
But in reality, all of our churches are just one slip or fall away from finding ourselves in the midst of that about which we have only read or heard. Just one lawsuit against your church can be devastating. So, what are you, as the pastor, supposed to do?
This is one of the reasons why so many pastors and church leaders across the country call us everyday. They have questions such as, “What is the best way to protect my church?”, “Should my church go ahead and get liability insurance?”, and “Is there anything more I can do to protect my church?”
Because liability insurance and protecting one’s church are such important topics for pastors, I wanted to address them here in this blog. And to assist me in doing so, I called on the expertise of Nolan Jackson. He has been in the insurance business since 1988, and he is able to provide liability insurance to churches in more than 20 states.
I recently had the pleasure of sitting down with Nolan to get his take on some of the very questions and concerns pastors have regarding liability insurance.
Therefore, in this post I am going to share with you what Nolan has to say on the matter of church liability insurance. Then, before concluding this post, I want to introduce, or maybe reintroduce, an additional strategy that I believe is instrumental to the longevity of your church.
Questions and responses with Nolan Jackson
Before delving into the questions, I believe it would be good to clarify what liability insurance is so that we are all on the same page.
In short, liability insurance is a type of insurance that protects the insured from the risks of liability that may be imposed by lawsuits and other similar claims. In the event that you are sued, liability insurance will protect you so long as the “claim” falls within your liability coverage.
With that being said, below are some of the questions and answers from my conversation with Nolan.
Question 1: What do pastors most commonly misunderstand about church liability insurance?
N.J. Response: I work with many churches that begin in the home of the pastor. And the misunderstanding amongst many of these pastors is that if anything were to happen while hosting a worship service or some other type of church gathering at their home, then their home owner’s insurance would protect them. The fact is that their home owner’s insurance would not cover such incidents. A home owner’s insurance plan was never meant to cover 20, 30, or sometimes even 40 people. So, in that situation, when a claim is made against the pastor’s home owner’s insurance, the insurer will come back and say that they are not covering this because you were acting as a separate entity.
Question 2: So, how early do you believe churches should get liability insurance?
N.J. Response: I really believe that churches should get liability insurance coverage as soon as they receive an EIN (employer identification number) or become incorporated with the state. The mistake pastors make often is putting off the task of getting liability insurance for their church. They give numerous reasons for their procrastination, but what ultimately happens is that they end up forgetting because they get busy and preoccupied with everything else. Pastors have so much else going on that they simply forget to follow up. Because of that, and the fact that it is simply best practice to do so, I believe churches should get liability insurance coverage from the very beginning.
Questions 3: What all is covered in a basic church liability insurance plan? And, how much does such a plan cost?
N.J. Response: For new churches starting out with 250 members or less, they can purchase a $1 million dollar policy for just $500 per year. This basic plan will cover slips, falls, and this policy even extends to ministerial counseling. This plan will also cover churches whether or not they meet in the pastor’s home or in their own facility.
Question 4: Are there any other “special” liability coverages available for churches about which pastors should know?
N.J. Response: Yes, there are additional coverages that pastors should seriously consider adding to their basic liability coverage.
1. Sexual misconduct coverage: Currently, we are seeing 1 to 3 sexual abuse claims come in from churches on a monthly basis. Because so many churches are desperate for volunteer help, they fail to run background checks or reference checks on their volunteers. We suggest for churches to require that anyone who wishes to volunteer have been attending the church for at least 6 months, in addition to performing background checks and reference checks. This coverage will provide legal council to the church in the event that it is sued for such an act. In the event that the church is found liable, this coverage will provide protection of up to $300,000. The sexual misconduct coverage is only an additional $100 per year.
2. Religious expression coverage: Since the Supreme Court Ruling on same-sex marriage last summer, many pastors have been concerned with their right of refusing to allow a same-sex ceremony to take place in their church, and their right of refusing to perform a same-sex ceremony. While it is important for a church to have strategic language in its bylaws to provide protection, I also believe that it is good for churches to have the religious expression coverage. In the instance that a church does get sued for refusing to perform or allow a same-sex marriage, the religious expression coverage will provide legal council throughout the lengthy legal battle. This is a $250,000 policy for only an additional $100 per year.
3. Directors’ and officers’ coverage: This covers the leadership of the church. There are times when someone may sue the board of directors for their actions on behalf of the church. This coverage says that if you are serving in a leadership role on behalf of the church and the church gets sued, then they cannot come after your personal assets. This coverage is only $125 per year for a $1million policy.
4. Content coverage: This coverage is especially good for churches that meet in locations where they are required to set up and tear down each week. The content coverage is for church assets such as sound equipment, instruments, furniture, etc., and it can be used to replace stolen or damaged equipment. This is a $25,000 policy for only $300 per year.
Question 5: How often should churches reconsider the liability coverage they have? And, is there anything else you would say to pastors regarding liability insurance?
N.J. Response: Well, first of all, churches will need to renew their liability coverage on an annual basis. I tell pastors to take time to assess how their church compares to where it was a year ago. If it is still relatively the same, then I suggest they maintain the coverage they have. It is usually once they hit the 250-member mark that I suggest for them to consider other liability insurance plans.
And then lastly, I cannot stress enough for pastors and church leaders to become familiar with their church’s liability insurance policy. It is not uncommon for pastors to think that their liability insurance will cover anything, when in reality that is not the case.
When liability insurance is not enough
I am in 100% agreement with Nolan when he says that all churches should have liability coverage, and if you do not currently have liability coverage then you should get it as soon as possible. But what happens in an instance when the liability coverage you have is not enough?
In addition to liability insurance, I believe there is a strategy that every church should implement; a holdings corporation.
A holdings corporation is created under section 501(c)(2) as a tax-exempt corporation that is controlled and owned by the church. Its sole purpose is to “hold” the church’s assets. The holdings corporation never does business with the outside world, and neither does it receive donations. It simply owns and holds the church’s assets to protect them from lawsuits and other intrusions.
Now just to be clear, I am NOT saying that if you have a holdings corporation then there is no need for liability insurance. It is still necessary for the church to have liability insurance even though the holdings corporation is the “owner” of the church’s assets.
What should you do now?
Liability insurance can easily be one of those tasks that you overlook when you are first starting your church. But protecting the dream and vision that God has given you through your church should be a top priority.
If you have any further questions about liability insurance, I want to encourage you to contact Nolan Jackson. You can check him out on the web by clicking here, or you can give him a call at 877-552-2576.
Lastly, if you have any further questions about starting a holdings corporation for your church or about what that may look like, please feel free to call us at 770-638-3444. We would love to hear from you!