May 2005
Buildings and Grounds

Avoid Unhappy Surprises

Editor’s note: Making sure that buildings are properly insured often falls under the vestry’s care. Acting as an undercover junior warden, I posed some insurance questions to Steve Follos of the Church Insurance Group.

I’m the new warden of St. William’s in the Woods. The Deep Woods. I assume that building insurance covers everything, right? Or are there unhappy surprises awaiting me if something goes wrong?

Church property policies come with a deductible that needs to be satisfied with each claim before coverage begins. Most parishes carry a $500 deductible. Larger parishes should consider higher deductibles in return for premium savings.

Property appraisals are an estimate of what an insurance carrier thinks it may cost to replace your damaged or lost property with new materials. It is possible to be underinsured at time of loss. The risk of being underinsured can be reduced by using a property blanket which combines the totals of all the properties you own.

Insurers appraise the building itself but use a percentage of that value to insure your contents. You should have an inventory stored off premises to make sure all of your personal property is replaced following a loss. Video inventories are popular because of the speed in which they can be done. Another option is to have your youth group go to each section of your property and write down anything they see that is not a part of the building.

The main exclusion under property insurance is wear and tear. Insurance is different from a warranty. For example, a roof that is 100 years old and has never been worked on would not be covered if the loss was due solely to its age.   

Flood and earthquake damage are also excluded from most policies; coverage can be purchased from your insurer for an additional premium. These coverages typically have a deductible that is a percentage of the building value versus a flat rate deductible. There are typically larger deductibles for hurricanes if you are in a coastal region.

What about the organ? Or that lovely antique picture in the altar guild room?   

The organ is considered a part of the building and covered under your building values. It is always a good idea to have your organ appraised to be certain it is included in the building value at the proper limit.

Basic church policies come with a limit on the amount of coverage for fine arts. Parishes should determine if they have adequate limits to cover these valuable items. A vestry should have its parish’s fine arts appraised and scheduled on the insurance policy.

Our treasurer’s third brother-in-law has a small insurance company who says that “Allied Mutual Wonderful Insurance” can cover us at 40% less than our current coverage. Budgets are tight so that sounds attractive...but how do we know that we won’t be making a mistake?   

It is always a good idea for a vestry to have insurance company representatives make a presentation before making a change.

There are usually coverage differences that account for premium differences. The vestry may decide that the risk is worth the premium savings but should understand and decide how conservative or aggressive it wants to be in taking on risk. Most parishes would rather pay a little more premium than have the responsibility paying for a large uncovered claim.

Vestries should ask their insurance agent to look at proposals from other companies and compare the differences in the programs.

Part of our roof blew off, but the insurance adjuster says it’s not really his problem and has come in with a settlement that will cover only half of the expected replacement. Is that it? Are we just out of luck?   

Most policies are written as replacement cost coverage. This means property is covered for the cost of new materials of like kind or quality. After your deductible, you should receive a check to cover the cost of replacement.

You may have actual cash value coverage. This type of coverage accounts for the depreciation of property. So instead of getting a check to replace the damaged property, you receive a check for what it is worth at time of loss.

If you have replacement costs and are being asked to settle for an amount that is half of what it will cost to have the work done, you should go directly to the carrier who is covering the loss. Support your claim by providing bids for the work that are higher than the offer to settle.

If you still feel you are not receiving a fair settlement, you may seek legal counsel or the help of a public adjuster.

A resident of Skippack, Pennsylvania, Steve Follos is a vice president of the Church Insurance Agency Corporation, which is overseen by the Church Pension Group. Church Insurance insures approximately 75% of Episcopal parishes and 82% of Episcopal dioceses.

This article is part of the May 2005 Vestry Papers issue on Buildings and Grounds