Friday, June 15, 2018

Hey Fletch … Our church has $2 million in umbrella insurance. Does that cover sexual abuse as well?

DRF—When I get a question on insurance issues, I always turn to the professionals. Insurance can be a highly technical area—and I always need a refresher course. Today let’s hear from noted attorney, Gregory Love. Tomorrow we will hear from an insurance agent.

Gregory Love—

As a sexual abuse attorney, I prefer doing prevention work—preparation to prevent an allegation and preparation to respond well if an allegation arises. Insurance is a very important piece of a sexual abuse preparation plan; it is not a substitute for safety measures, but plays a very important role in the event a situation arises. After years of crisis response work, I have created an exercise … a Sexual Abuse Fire Drill. This is a comprehensive study regarding potential sexual abuse risk—and insurance coverage is one of the most significant revealed weaknesses. In short, I have my organization assume it is facing a multi-victim sexual abuse allegation involving a trusted staff member. One of the first categories of inquiry is the available insurance coverage to handle a multi-victim allegation. Most organizations learn that they have insufficient coverages/limits or that they misunderstood which section of the policy involved sexual misconduct/sexual abuse.  

This exercise arose from a number of “in the ditch” experiences. One Texas church, for example, contacted my office on the very front end of a sexual abuse matter involving a children’s ministry staff member and up to four children ages seven and eight. When I reached the insurance part of my inquiry, I was told the church had a $1,000,000/$3,000,000 policy; in essence the church had an aggregate of $3,000,000 available to cover a multi-claimant lawsuit. This seemed reasonable given the size of the church. When I asked for the policy, however, I realized that the church’s executive pastor was misreading the policy. There was $1,000,000/$3,000,000 available for general liability and injury; on Page 3 of the policy, there was a Sexual Misconduct Endorsement limiting coverage to $100,000 for each claim with a maximum possible aggregate of $300,000. Prior to the allegation, the church leadership believed “all is well.”

When the church was sued, the insurance company simply tendered its total obligation of $300,000 and bowed out of the matter. The church had to come out-of-pocket for its legal defense and settlement funds; the church had to sell most of its real estate to resolve the matter.

Morals to the story: (1) read your policy closely; (2) have an insurance agent that is skilled beyond your ‘property and casualty’ needs; (3) do a Sexual Abuse Fire Drill—ask these questions before you are in crisis … while you still have the chance to address potential weaknesses in your system or your coverages.