Saturday, June 16, 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. Yesterday we heard from noted attorney, Gregory Love. Today, let’s hear from Charlie Cutler, a respected a insurance agent in southern California. Charlie is the prototype of a great agent—knowledgeable, helpful, honest, gives it to you straight, gets more information as needed.
Charlie Cutler—Glad to be brought into the conversation! If this particular church hasn’t jumped through quite a few hoops to include abuse in the umbrella, then it likely doesn’t have that coverage. The term “umbrella” is a bit misleading. It sounds like there is a broad policy that covers anything that happens at a church. Policies used to be written this way, but virtually all “umbrellas” nowadays require that there are limits on the base policy and that wording on the umbrella policy says that particular coverage is included in the higher limits. A more appropriate term is actually “excess.” This means that you have limits “in excess” of the base policy.
Key items in the insurance policy should include Directors & Officers, Counseling, Sexual Misconduct, Coverage for your Security Team (especially if you have a formal team and/or if anyone is armed), Cyber Liability, Foreign Liability, and Non-owned Autos. The key to determining the limit is that it shouldn’t ever be one person’s decision. The board should annually be informed what the current limit is and be sure that they are all comfortable with it.
For an active church like the one you describe, most boards would be comfortable with $1million plus a $2 million umbrella (total protection of $3 million). A key point on the limit is that $1 million for Directors & Officers isn’t $1 million each board member … that is the total amount of protection for the entire board. If you have board members with high assets, those boards want to be sure that the umbrella/excess extends over the Directors & Officers Insurance to cover their personal exposure.
The majority of claim dollars are spent in the property area. With construction growing and unemployment low, replacement costs are growing faster than most insurance policy limits. Most churches should increase their property limit by about 10% from 2017 to 2018.
Additionally, we see that most churches don’t think about the other costs during a claim … what it takes to rent an alternative location, lost tuition income, decreased giving, and much more. A major property claim (especially where the cities are difficult to work with) can last two years … think of what it would cost to rent a space for two years to keep your ministry going.
Lastly, I’d like to emphasize the importance of Ordinance & Law Coverage. If your church was built more than a couple of years ago, it doesn’t meet current codes…fire sprinklers, “green” upgrades, energy efficient requirements, ADA access, etc. Talk about this with your agent (and hopefully a contractor in your congregation) to get a feel for what would be appropriate.
Insurance is more than an annoying line item in your budget … it’s a tool for ministry protection and continuity. A good agent should have a ministry-focused discussion with how this applies at your church!