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Editor’s note:This is part of a
continuing series on what churches can do to protect from the
unanticipated. Earlier parts of the series focused on Church fires: Damage, recovery, prevention.
By Paul Stephens*
7:00 A.M. ET July 10, 2013 | NASHVILLE, Tenn. (UMNS)
While a contractor can tell with some certainty the cost per square foot to rebuild a burned church building, a defense attorney cannot tell you with certainty what to expect in a serious liability lawsuit.
The worry of fire or natural disaster that destroys the property is
easy for church stewards to recognize, but the concerns of potential
liability actions charging physical or mental damage are not always as
obvious until the unanticipated occurs.
General liability insurance is necessary for any business, with or without a storefront. That is true for churches as well.
Most general liability insurance policies for nonprofit
organizations — which is where churches are categorized — protect the
corporate entity, its subsidiaries and affiliates, its executive
officers, employees and volunteers for their actions on behalf of the
organization. These policies are designed to protect against civil
liability for bodily injury, property damage or personal injury to
others.
These are the assumptions in this kind of policy:
- The claim in a lawsuit must seek compensation because of injury or damage.
- The injury or damage must have been fortuitous and have occurred during the policy term.
- The policyholder must be liable for the injury or damage.
There also are costs that most churches would not think about. For
instance, a general liability policy also covers funds required to
defend the insured policyholders, such as legal and expert-witness
fees, reasonable costs to secure other witnesses for court appearance,
post-judgment interest and appeal-bond premiums. These “supplementary
payments” are normally payable in addition to the stated limit of
liability. A conventional general liability policy has no deductible.
Premises, contracts, injuries and more
The ideal general liability policy provides a broad range of
coverage for a variety of operational risks. That is why it is called a
broad-form contract. This type of policy commonly includes:
- Premises and operations liability, attributable to aspects of the
physical plant or daily operations. Examples: A visitor trips on a
cracked sidewalk (premises liability) or boisterous, unsupervised
children knock down an older parishioner (operations liability).
- Contractual liability for injury or damage assumed by oral or
written contract. Example: The municipal parks and recreation
department asks the church to defend and pay a bodily injury claim
pursuant to signing a facilities-use agreement for a church picnic at a
city park.
- Personal injury liability for false arrest, detention or
malicious prosecution; libel, slander or defamation; and invasion of an
individual’s right of privacy. Example: A community member sues after
the church newsletter publishes controversial statements about her.
- Advertising injury liability for plagiarism or piracy of one’s
copyright or trademark. Example: Another business claims the
policyholder’s logo is confusingly similar to its own.
- Legal liability for fire damage to someone else’s property while
the policyholder is occupying it. Example: A cabin sustains fire damage
originating from a smoldering cigarette during a retreat.
- Incidental medical malpractice liability for a non-medical
professional’s rendering of, or failure to render, medical aid.
Example: A pastor administers cardiopulmonary resuscitation with an
adverse outcome.
- Products liability for injury or damage caused by a “product”
made or sold by the policyholder. Example: A child sustains an injury
by a pre-owned toy purchased at a church rummage sale.
- Medical payments liability for cost of medical treatment, payable
without regard to or concession of policyholder’s liability. Example:
The church offers to cover emergency-room bills after a parishioner
falls on icy steps.
Churches must be even more specific
Churches must expand a broad-form general liability policy to address significant church-related exposures:
- Pastoral counseling liability risk is physical or emotional
injury attributable to a clergyperson’s acts, errors or omissions
during counseling of a spiritual nature. Example: A couple alleges that
marital counseling further injured their relationship.
- Sexual misconduct liability risk is physical or emotional injury
because of sexual abuse, molestation or exploitation. Example: A
minister initiates a sexual relationship with a parishioner to whom he
or she has provided pastoral guidance.
- Cemetery operations (including columbaria) liability risk is
physical or emotional injury because of an act or omission in connection
with the cremation, burial, disinterment or temporary care of any
deceased human body. Example: Cremains held for temporary safekeeping
until burial are misplaced.
- Teachers’ liability risk is bodily injury or property damage
arising out of teaching activities, including the administration of
corporal punishment.
Some things not covered
Although the typical general liability policy contains a variety of
situations not covered by the contract, here are some of the most
noteworthy exclusions:
- Liability arising in connection with ownership, maintenance,
operation, use, loading or unloading of automobiles, aircraft and large
watercraft.
- Employment-related liabilities, including obligations under
Workers’ Compensation, unemployment or disability benefits laws and
work-related claims under common law by employees or their family
members.
- Damage to property owned, used or occupied by the policyholder, or property in an insured’s care, custody or control.
- Liability resulting from the willful violation of laws addressing
discrimination, humiliation, harassment or wrongful termination
because of race, creed, age or sex.
- Fines, penalties, punitive or exemplary damages typically awarded
to punish willful, wanton or reckless behavior (gross negligence).
- Liability arising from pollution, nuclear energy or asbestos.
Finding the right insurance is a challenge. As your guiding principle, remember the words once told me by a wise trustee:
“All insurance policies are the same until you have a claim.”
*Stephens is vice president of marketing and risk-management
services for The Church Insurance Agency Corporation, a service
provider to United Methodist Insurance. United Methodist Insurance is a
wholly owned, nonprofit subsidiary of the General Council on Finance
and Administration of The United Methodist Church.