Mobilizing our Assets for Mission
Extension Ministries and Risk
Many Episcopal 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. And 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 or dog sitting, as well as hosting 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 pledges and giving at Sunday services, 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, like 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 a student injures another during practice on your premises?
Some things to consider when signing a lease agreement
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 in 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 that the lessee not be held 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.
You should not agree to such a clause.
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 diocesan chancellor, whose role is to act as legal counsel for the diocese or parish, 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.
Balancing risk and benefit
While everyone is in favor of churches extending their ministries to better serve their communities, grow their parishes and hopefully, improve their economic positions, vestries 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 the purpose? Are handrails solid and lighting adequate? 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.
Of course, Church Insurance Companies is ready to field any risk management-related questions about expanding a ministry’s footprint. No matter which provider you choose, you can review our checklists and tip sheets on risk management at www.cpg.org/CIC or contact us at 800-293-3525. We’re here to help.
Steve Follos serves as 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, seeking to provide organizations the broadest cost-effective coverage available in the marketplace in a financially sustainable way.
- Managing Resources, Part 2: Administration by Nancy Davidge and Susan Elliott, Vestry Papers, November 2015
- For Things Done and Left Undone by Steve Follos, Vestry Papers, May 2014
- Help When You Need It by Steve Follos, Vestry Papers, May 2014
- Assessing Risk to People and Property, by Barbara Ballenger, ECF Vital Practices blog, September 13, 2013