Churches often allow outside groups to use or lease their premises. Obviously, the use of church property by an outside group exposes the church to potential liability for injuries that may occur, and this risk escalates if the property is being used for an activity that involves minors. Consider the following examples.
Example. A church leases a portion of its premises one evening per week to a local scout troop.
Example. A church leases several rooms to an outside group to operate a preschool.
Example. A church leases a room one morning each week to an outside group for the operation of an exercise class
Churches respond to this risk in various ways. Many require the outside group to list the church’s name as an “additional insured” in its general liability insurance policy. A recent case in New York suggests that this practice may be unavailing and lull church leaders into a false sense of security.
the New York case
A church leased a portion of its premises to an outside group for three days to conduct a dance competition. The lease required the group to name the school as an additional insured in its liability insurance policy.
A woman was injured when she fell on a sidewalk while walking from the parking lot behind the school to the front entrance in order to attend the dance competition. She sued the church, claiming that her fall was caused by the church’s negligence. The church contacted the outside group’s insurer and requested that it provide a legal defense of the victim’s claims and indemnification for any verdict or settlement. When the insurer refused, the church asked a court to compel it to do so.
The court noted that the insurance policy defined an “insured” to include any organization to whom the insurer was obligated, by virtue of a written contract, to provide liability insurance, “but only with respect to liability arising out of [its] operations.” In other words, the fact that the church was named as an additional insured on the policy did not mean that it was entitled to a legal defense and indemnification against any loss. The section in the policy limiting coverage to liability “arising out of [the insured’s] operations” required that there be “some causal relationship between the injury and the risk for which coverage is provided.”
The court concluded that the church failed to demonstrate the existence of such a causal relationship. The outside group’s “operations” consisted of conducting a dance competition in the school auditorium and three classrooms. Bodily injury occurring on a sidewalk outside the leased premises, in an area which the outside group had no responsibility to maintain or repair, “was not a bargained-for risk.” Rather, the group’s operations at the school merely furnished the occasion for the accident. Christ the King Regional High School v. Zurich Insurance, 936 N.Y.S.2d 680 (N.Y.A.D. 2012)
relevance to church leaders
Many churches allow outside groups to use or lease their property. It is common for churches to require that an outside group’s insurance policy list the church as an additional insured. But as this case illustrates, such a practice will not necessarily provide coverage for the church in the event of an injury, especially one that bears no direct relationship to the nature of the outside group’s activities. This can result in an unexpected and potentially significant liability for the church.
The takeaway point is this: church leaders should not agree to the use of their property by outside groups on the assumption that being listed as additional insured in the outside group’s insurance policy will create an effective firewall against church liability. Before allowing outside groups to use or lease church property, discuss the issue of insurance with your insurance agent as well as legal counsel so that you clearly understand the availability of coverage under the outside group’s policy. On the basis of this information then, churches can make an informed decision on whether to allow the outside group to have access to church property and any additional precautions that may be necessary.
risk management checklist
Before allowing outside groups to use or lease church property there are several points to consider, including the following:
- Use of church property by an outside group will expose the church to potential liability, especially for activities involving minors.
- There is no way to create a “firewall” that insulates a church from all risk of liability under these circumstances.
- Churches should consider several risk management options before allowing church property to be used by outside groups.
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All general liability insurance policies have a “named insured,” which generally is the entity that procured the insurance. The named insured can add one or more other entities as additional insureds. Having your church’s name added as an additional insured” to the general liability policy of an outside group that uses or leases church property for a specified purpose or activity is one way that a church can manage the risk of liability in the event of an injury.
But, as this case illustrates, it is not fool-proof. Conditions apply, and church leaders need to be familiar with the conditions so they can accurately evaluate coverage. The last thing you want to do is assume that having your church named as an “additional insured” will create an effective firewall when in fact this is not the case. So, it is important to discuss this option with your insurance agent, and legal counsel, so that you are fully informed concerning the viability of this option for managing risk.
- The risks associated with the use of church property by outside groups can be mitigated in other ways. Consider the following:
- Check with the church’s insurance carrier to evaluate coverage in the event of an injury during use of church property by an outside group.
- You must assess the increased risk of legal liability associated with the use of your property by outside groups. Some risks may be too great to even consider, especially when you consider the relatively modest user’s fee, if any, that will be assessed.
- Any activity involving minors represents the highest risk. The outside group must provide evidence of insurance in an amount that is acceptable to you.
- Have the outside group sign a “facilities use agreement” that (1) provides the group with a mere license to use the property; (2) contain hold harmless and indemnification clauses; (3) states that the church provides no supervision or control over the property when being used by the group. This document should be prepared by an attorney.
- Review the outside group’s liability policy to ensure that it provides adequate coverage. Be certain that it does not exclude sexual misconduct. Also, pay close attention to the coverage limits. Are they adequate?
- Add the church as an additional insured under the outside group’s liability insurance policy. This may not be effective in all cases, but it will be in some and so is definitely worth doing.
- If the group’s activities will involve minors, have a written acknowledgment from the group that all workers have been adequately screened.
- Note that release forms are generally unenforceable against minors who are injured since they have no contractual capacity to sign such a release and their parents or guardians lack the legal authority to release a minor’s legal rights.
- There are other issues to be considered when a church allows outside groups to use or lease its facilities that are beyond the scope of this article. These include the application of the federal unrelated business income tax, the loss of the church’s exemption from property tax, either fully or on a prorated basis, and, the potential violation of local zoning laws.
- It is highly recommended that a church seek legal counsel when considering the use of church property by one or more outside groups.
