The average church is wide open to dangerous legal liabilities.

Is Your Church at Risk?

By Robert Hidde

Almost every pastor has been tempted to write this kind of letter at some point in his ministry. The letter, written by Jerrold Swinton, a United Methodist district superintendent, urged the Shell Rock Church to “acknowledge they allowed the spirit of Satan to work in their midst, express some contrition, and seek help.”

A small group of members led by Jane Klienbenstein refused to accept a new minister and began a campaign of rumors against the pastor. The district superintendent’s letter was sent to the church’s mailing list (which included members and non-members who had requested to receive mail from the church).

In the letter, the superintendent wrote, “When will you stop the blaming, negative and unhappy persons among you from tearing down the spirit of Jesus Christ?” He added, “You know whether a person has the spirit of Jesus or Satan by their fruits.” He announced a congregational meeting to deal with the problems and the people causing them.

The Klienbensteins sued Swinton and the conference for defamation. The county district court ruled in favor of the church. The Klienbensteins appealed to the Iowa Supreme Court and prevailed. The Iowa Conference has appealed to the United States Supreme Court.

Rethink Liability

While this case may not be typical of the liabilities that concern a church, there are myriad sources of liability for congregations. These range from the traditional risks from accidents on church property, fire, vandalism and theft to allegations of sexual abuse by volunteers and the clergy. It should be obvious to us that churches need to rethink their way of doing things, as well as reevaluate the type of insurance coverage they have.

If we were to ask most people what the four most important documents in the church were, we would get several different answers. The Bible would probably rank first, with the Treatise, hymnals and Sunday School literature competing for the next three positions. While the Bible should always be the most important document in the local church, the second, third and fourth most important documents in the church are its articles of incorporation and bylaws, written policies and procedures, and insurance policies.

Articles of Incorporation

An unincorporated church may be legally recognized as a religious organization, but in most instances this recognition does not create the legal entity necessary to protect those who make up its membership and are responsible for decision making. Regardless of its size, every church should be incorporated in order to protect its officers and members from liability.

When a church, business or ministry incorporates, it becomes a separate entity that, among other things, can own property, incur debt, transact business, execute contracts, and sue and be sued. This separate entity is governed by its members and those to whom it grants specific authority through its bylaws.

This legal standing can help protect the assets of individual officers and members in the event it defaults on financial obligations or in the wake of lawsuits resulting from accidents or allegations of misconduct. The limits to which individuals are protected depends to a large extent on the wording of the church’s bylaws.

The church’s bylaws establish the way the church is governed. They clearly define the distribution of authority for decision-making, how finances are handled, and the method for the selection of officers and staff. The bylaws should also identify the limits of personal liability incurred by employees, unpaid staff and officers, volunteers and board members, as well as provide clear procedures for dealing with disputes within the church (simply stating that “all disputes will be handled according to scripture” or citing a passage is not sufficient).

Unfortunately, the bylaws of most churches are the product of simpler times and usually fail to address important issues that can help protect the pastor, staff, unpaid workers and congregation from liability. Church bylaws should be carefully reviewed and thoughtfully revised with the assistance of an attorney.

Written Policy Manual

The next document in importance for a church is a written policy manual outlining guidelines for staff and officers (paid and unpaid). This manual should include rules for working with children and youth, procedures for responding to complaints about staff, officers and volunteers, and limitations on church-sponsored events. Every staff member and officer should have a copy of the manual and be required to attend group orientation sessions to ensure their understanding of the policies.

This manual does two things for the church. First, it lays out a systematic plan for handling all personnel (paid and unpaid) matters, and second, if properly written and followed, it can provide a means of defending against negligence and negligent staffing claims.

Areas that should be covered in the manual include a requirement that anyone handling church finances or working with children and youth undergo a thorough reference and background screening. In the case of individuals working with children and youth, it is imperative to check the registered sex offender listings in addition to the standard background check.

State laws regarding background checks and the waivers required before performing them vary widely; it is recommended that the church obtain the services of a firm that specializes in performing these checks. One individual in the church should be assigned the task of handling all paid and unpaid personnel issues and screening, and receive training on the legal requirements for obtaining, safeguarding and using the information.

To further protect the church against liability from child abuse allegations, the guidelines for working with children should discuss issues such as limits on the workers’ authority to discipline children, a rule that two adults (preferably not related) be present at all children’s activities, as well as establishing an adult to child ratio for classes and activities.

The policy should also discourage the practice of a non-custodial adult being alone with a child for any reason. Other topics should include a requirement for written waivers from parents or guardians for trips and activities, as well as a list of activities not covered by the church’s general liability insurance policy.

Insurance Policies

This brings us to another set of documents that are important to the church, its general liability and property damage insurance policies. The church’s designated representatives (usually the Trustees or General Board) should meet with the church’s insurance agent annually to review their coverage.

In addition to ensuring that coverage is adequate to cover losses by fire or vandalism, this review should address other areas including hired and non-owned vehicle coverage, accidental medical coverage for volunteers, special events coverage (including coverage for events taking place off church property), errors and omissions, and coverage for theft and embezzlement.

The Apostle Paul reminded us that we are in the world but not of the world. The unfortunate fact is that being in the world means the church in a post-modern world faces many legal concerns unheard of 50 years ago. For that reason, every church should protect itself before the need arises by investing in a legal review of its bylaws, obtaining legal assistance in formalizing procedures and policies relating to staff and volunteers, and minimizing risks through increasing and improving its insurance coverage.

About the Writer: Reverend Robert Hidde, a Free Will Baptist pastor in Tulsa, Oklahoma, serves as senior partner at Hidde and Associates, a consulting firm specializing in human resources issues. Adapted from Contact Magazine, March 2004.