By Steve Follos
Many churches are looking for potential new sources of income as they worry about how to bridge the gap between declining plate contributions and rising operating costs.
Because churches often include multiple buildings, it makes sense to look at ways to maximize the use of these properties.
As a result, it’s now increasingly common for churches to provide a range of activities and services such as babysitting nights, mothers’ days out, community classes, cook-offs, fairs, dog sitting, daycare centers, preschools, community farming, shelters, soup kitchens, thrift stores or sports clubs.
While these activities can potentially attract new congregants and generate more revenue than traditional tithing and giving at a Sunday service, they can also increase the likelihood of accidents and mishaps.
Traditional uses of church spaces such as book or quilting clubs probably don’t increase the risk you take as an organization, but others, such as daycare and preschools, should certainly lead you to reassess the level of protection you need to safeguard your people and physical assets.
For example, if you lease your community hall to a weekly karate club and they don’t have adequate — or any — insurance, what will the consequences be for you if one student injures another during practice on your premises?
It’s critical that any organization with which you sign a lease agreement has acceptable insurance coverage. The typical requirement for such an organization is a minimum of $1 million of liability protection.
Moreover, the organization’s insurance must be primary to yours, meaning that it will be liable for any claims, regardless of fault, while the organization has care, custody, and control of the facility.
It’s also vital to make sure you’re not signing away essential rights. If the lessee has an attorney draw up the agreement, it’s possible that you will be asked to not hold the lessee responsible for any damage caused to the property, or for injuries that happen while using it — a so-called hold harmless clause that would, at a minimum, result in a waiver of your rights. This is something to which you should not agree.
The lessee organization may also try to get you to give up the right to subrogation – that is, the right of an insurance company, after it pays a claim, to seek to recover the money from anyone who may have caused, contributed to, or insured the loss.
For example, suppose a couple of those karate kids are tossing a football around your community hall and one of them hits a ceiling light fixture, which crashes down on the wood floor, damaging it. If you make a claim on your policy, your insurer may then seek reimbursement from the carrier of the at-fault party, the karate club.
Your legal counsel can review the lease and point out any necessary revisions that you should seek. Alternatively, you may know a congregant with sufficient legal experience to advise you, likely on a pro bono basis.
While everyone is in favor of churches extending their ministries to better serve their communities, grow their parishes, and hopefully improve their economic positions, church leaders must understand that with more activity comes greater risk, and greater risk requires more protection.
When considering adding activities or services, church leaders should spend time assessing risk to determine if a sponsored event will be safe. Is the building fit for purpose? Are handrails solid, lighting adequate, and do the premises meet fire code requirements?
If the extension ministry is church sponsored, reassess whether your liability limits are adequate. Extra peace of mind can come from augmenting the typical $1 million of general liability coverage with $1 million, $5 million or $10 million of additional protection from an excess or umbrella policy.
If the activity isn’t church sponsored — for example, if you enter an agreement to allow a professional counseling service to operate on your premises — that entity may be a separately incorporated for-profit organization or a tax-exempt charity, in which case, you should consider a separate policy from a carrier that understands the specific needs and risks of such arrangements.
Such careful thought and planning can pay off in the long run. Mitigating risk can, over time, help reduce insurance premiums by reducing the number of claims filed.
Steve Follos serves as senior vice president and general manager of Church Insurance Agency Corporation. For more than 90 years, The Church Insurance Companies have focused on fulfilling its mission to protect the people, property, and finances of The Episcopal Church. It seeks to provide organizations the broadest cost-effective coverage available in the marketplace in a financially sustainable way, www.cpg.org.
