When a director’s action or inaction comes under fire via lawsuit, the question of whether the behavior in question is covered by insurance policies owned by the church can become one of vital concern. The fact is, there are a number of different types of insurance available to churches that cover various forms of director behavior.
The lowest level of insurance available would be the types considered homeowners or personal liability “umbrella” insurance policies. While this type of insurance does cover director activity (so long as that activity is, indeed, performed by a director discharging their duties), the coverage is available in only very limited circumstances. Generally speaking, this kind of insurance will cover only cases of either bodily injury or property damage. Given the broad scope of behaviors for which a church director can be accused, many churches consider such narrow coverage to be insufficient.
Under Arizona law churches may purchase insurance to cover their directors and officers in the cases of claims that go to the heart of their duties or their status as directors or officers of the church. This is known as Directors and Officers (or D&O) Insurance. These policies pay out even when the indemnification clauses included in the church bylaws do not, for one reason or another, provide protection to the directors or officers from liability. But these policies are expensive and do not come in standard forms. Any given policy may contain a good number of exceptions in which the insurance company will not be required to pay out, such as in the case of pollution or environmental damage; libel or slander; discrimination; breach of employment contracts; claims brought against officers or directors by other officers or directors; ERISA violations; and so on.
Provident Law’s church and nonprofit attorneys can help a church and its members to ensure they have the proper level of insurance that they desire. In fact, we counsel churches through the process of any transaction. We also stand ready to counsel and serve charities, foundations, private schools, colleges, universities and other types of nonprofit organizations—providing broad transactional and general counsel services in Arizona and surrounding areas. Contact us to learn more.