Risk Management Studies
One of the features of the Church Risk Management Program of The Church Insurance Company is to study the insurable risks of parishes and to recommend appropriate answers to such questions as these:
- At what dollar amount should various properties be covered: reproduction cost value, replacement cost, actual cash value, market value or sale price, or subjective value?
- Should boiler and machinery insurance coverage be purchased?
- How much coverage, if any, should be purchased under the fidelity bond policy, in excess of the $100,000 coverage provided and paid for by the Episcopal Diocese of New York?
- What is the best dollar amount for deductibles?
- Should the parish carry liability coverage for automobiles not owned by the parish?
Property and Liability Insurance
Nationally, 84% of the coverage of the Episcopal Church is written by The Church Insurance Company, whose sole owner is The Church Pension Fund. Both Church Insurance and The Church Pension Fund are official Agencies of the Episcopal Church. The stated goals of Church Insurance, which dates back to 1929, are to provide insurance for all Episcopal Church property without regard to age, location, or susceptibility to natural hazard, to operate in an efficient manner, offering coverages at the lowest cost consistent with sound underwriting practices; to develop and utilize a staff of qualified insurance and loss-control specialists; and to contribute to the assets of The Church Pension Fund by means of dividend payments. Church Insurance insures only properties of the Episcopal Church, and policyholder needs are handled through eight field offices. Sue Polnow is our Church Insurance representative, you may reach her at 1-800-293-3525 or [email protected] .
In mid-1986, an ad hoc Insurance Committee appointed by Bishop Paul Moore rendered its report. Among its recommendations were these:
- Whenever possible, all parishes should consider placing their insurance with Church Insurance. While providing excellent coverage (especially through the Pinnacle Program), the premiums are well below industry rates.
- Parishes should increase deductibles to the $1,000 range, which will result in rate credits.
- Churches should keep on file photographs and a complete inventory of all objects, whether fine art or not. A copy of the inventory should rest in a safe place off the premises at risk.
- Churches should appoint a Risk Manager and join the Risk Management Program to receive a 10% credit on their premiums.
- The Pinnacle Program referred to above is a multi-peril insurance concept designed especially for churches and church institutions. Offered by Church Insurance, the Program delivers protection tailored to the needs of each individual insured. The 10% reduction in premium cost mentioned above is available to those parishes that actively and continuously participate in the Church Risk Management Program, the basic purpose of which is to reduce risk of loss and therefore to reduce actual losses.
The Program contains such elements as the designation of a church Risk Manager and Alternate, a facilities and activities study, property inspection, security inspection, an inspection of people safety, a survey of energy management, and a survey of transportation safety. As of a recent date only 51 of the 196 parishes in the Episcopal Diocese of New York were receiving the 10% discount.
The parish should make certain that any contractors working on the premises are fully covered by their own insurance policies.
Insurance for Outside Groups
Outside groups that use church property are not covered by the church’s liability policy, even though the church itself is provided protection in case a claim is made against the church. Before such groups are permitted to use church property, they should have their insurance carrier issue a Certificate of Insurance (indicating they have arranged their own liability coverage) and naming the church as an additional named insured on the policy. On the other hand, any group that is owned and/or operated by the church itself should be covered by the church’s own property and casualty insurance. The congregation should take care that its insurance company, whether Church Insurance or any other carrier, is fully informed of all programs run by the congregation and that the programs are covered under the church’s policy.
Directors and Officers Liability Insurance
Directors and Officers Liability Insurance was developed to cover the potential risk of loss of those individuals serving as the directors and officers of an organization. Under this form of legal liability protection, an insurance company will provide the necessary defense and pay, on behalf of the directors and officers, either individually or collectively, judgments, awards, and settlements resulting from claims involving “wrongful acts” committed by such persons. If an organization has an indemnification clause in its charter or by-laws, the insurance company will reimburse the corporation for any payments it is required or permitted by law to make to its directors and officers resulting from their liability, imposed by the courts, arising out of a “wrongful act.”
“Wrongful act” is defined as any actual or alleged error or misstatement or misleading statement or act or omission or neglect or breach of duty by directors and officers in the discharge of their duties, individually or collectively, solely by reason of their being directors or officers of the organization.
This policy, unlike other forms of legal liability insurance, is written on a “claims made” basis. It therefore responds, on behalf of directors and officers, only to lawsuits that commence during the term of the policy. The date on which a “wrongful act” is alleged to have been committed and which subsequently forms the basis for an action in law is not controlling as to whether a given act is covered.
The Church Insurance Company’s Directors and Officers Liability Policy has been designed especially for the Episcopal Church. Its definition of a director or officer therefore includes trustees, clergy, wardens, and members of vestries who were, now are, or shall be associated with an incorporated organization, diocese, church, or school.
It is important to note that this insurance is subject to a Self-Insured Retention, similar to a deductible clause, which is borne by either the organization or by its individual directors and officers. Under The Church Insurance Company’s Directors and Officers Liability Policy, the usual retention for each director and officer is $1,000. An organization that has an indemnification provision in its charter or by-laws will find its Self-Insured Retention generally set at $5,000.
There are some policy exclusions. Among them are claims against directors and officers involving their gaining in fact any personal profit or advantage to which they were not legally entitled, claims alleging libel and slander, claims arising out of bodily injury, sickness, disease, or death of any person, and claims resulting from damage to any tangible property. (Bodily injury and property damage claims will generally be covered by a General Liability Policy.)
The Episcopal Diocese of New York provides and pays for $100,000 coverage, with a deductible of $12,500. When a parish needs coverage of more than $100,000, it should secure and pay for the excess from The Church Insurance Company.