Pastor, Church & Law

Key point 6-08. State and federal laws provide limited immunity to uncompensated officers and directors of churches and other charities. This means that they cannot be personally liable for their ordinary negligence. However, such laws contain some exceptions. For example, officers and directors may be personally liable for their gross negligence or their willful or wanton misconduct.

Most states have enacted laws limiting the liability of church officers and directors. In some states, these laws protect all church volunteers. In some cases, the statute may protect only officers and directors of churches that are incorporated under the state's general nonprofit corporation law. The most common type of statute immunizes uncompensated directors and officers from legal liability for their ordinary negligence committed within the scope of their official duties. These statutes generally provide no protection for "willful and wanton" conduct or "gross negligence."

"Compensation" ordinarily is defined to exclude reimbursement of travel expenses incurred while serving as a director or officer. Churches that compensate their directors and officers over and above the reimbursement of travel expenses should reconsider such a policy if they are located in a state that grants limited immunity to uncompensated officers and directors. Obviously, these statutes will not protect ministers who receive compensation from their church.

Tip. Churches should consider adopting an appropriate resolution clarifying that a minister's annual compensation package is for ministerial duties rendered to the church, and not for any duties on the church board. Like any other church officer or director, the minister serves without compensation. Such a provision, if adopted, might qualify the minister for protection under the legal immunity law. It is worth serious consideration.

Statutes immunizing the directors and officers of nonprofit organizations from liability do not prevent the organization itself from being sued on the basis of the negligence of an officer or director. The immunity statutes only protect the officers or directors themselves. Many of the immunity statutes apply only to the directors and officers of organizations exempt from federal income tax under section 501(c) of the Internal Revenue Code. Some of them appear to apply only to incorporated organizations.

Why have states enacted such laws? The primary reason is to encourage persons to serve as directors of nonprofit organizations. In the past, many qualified individuals have declined to serve as directors of such organizations out of a fear of legal liability. The immunity statutes respond directly to this concern by providing directors of nonprofit organizations with limited immunity from legal liability.

The Willful And Wanton Misconduct Exception

Example. Bob is a registered sex offender who previously was convicted of molesting a child. He served time in prison, but was released a few years ago. He has started attending a church, and the church board learns of his background. Some members of the board are concerned about having Bob attend the church, and they speak with him. Bob assures them that he was "rehabilitated" while in prison, and no longer poses a risk of harm to anyone. Nothing is done to monitor Bob. Several months later, Bob is charged with the molestation of a child on church property. The board is distressed by this development, but take comfort in the fact that they are immunized from personal liability by state law. They should not assume that they are protected against personal liability by a state law conferring limited immunity from liability on the acts of uncompensated church board members. Such laws do not apply to willful and wanton misconduct, and it is possible that a court would conclude that the board was guilty of such behavior by allowing Bob unrestricted and unsupervised access to church property despite its knowledge that he is a registered sex offender.

Case studies

• A federal court in Arizona ruled that the federal Volunteers Protection Act (see sidebar) prevented individual board members of a charity from being personally liable for unpaid wages claimed by a former officer. The officer claimed that the charity had violated the federal Fair Labor Standards Act. Since the charity had no assets, it was undisputed that the individual board members would be responsible for any damages. The board members argued that the Volunteer Protection Act protected them from any personal liability, and the court agreed. The court concluded that the Act was intended to protect all volunteers from tort liability, whether state or federal, and that "the broad, plain language of the Act indicates it covers all liability whether rooted in tort or contract."[218] Armendarez v. Glendale Youth Center, 265 F.Supp.2d 1136 (D. Ariz. 2003).
• A Colorado court ruled that a denominational agency could be sued by a woman with whom a minister had sexual contacts, and that a state statute providing limited immunity to uncompensated officers and directors of nonprofit corporations was not a defense.[219] Winkler v. Rocky Mouton Conference, 923 P.2d 152 (Colo. App. 1995). The statute specifies, "No member of the board of directors of a nonprofit corporation or nonprofit organization shall be held liable for actions taken or omissions made in the performance of his duties as a board member except for wanton and willful acts or omissions."[220] COLO. REV. STATS. § 13-21-116. The court concluded that this provision did not apply in this case, since there was no evidence that the agency "accomplished its work through unpaid volunteers."
• An Illinois court ruled that board members could be personally liable for the molestation of a child on a school bus, despite a state law conferring limited immunity from liability, because their behavior in failing to adequately protect the victim was willful and wanton. Illinois law grants limited immunity from liability to school board members, meaning they cannot be personally liable for their acts unless they are guilty of "willful or wanton" misconduct. The victim alleged that the board members were guilty of willful and wanton misconduct because they failed to ensure that a school bus attendant was present on the bus while he was a passenger. A state appeals court ruled that the victim alleged sufficient proof of willful and wanton misconduct by the board to let the case go to a jury. It observed: "Plaintiff has properly pled knowledge on the part of the board that the attacker was likely to commit a sexual assault on the passengers and that an attendant was required."[221] Doe v. Chicago Board of Education, 791 N.E.2d 1283 (Ill. App. 2003). Accord Doe v. DeSoto Parish School Board, 907 So.2d 275 (La. App. 2005).
• The Minnesota Supreme Court rejected the argument that a state limited immunity statute only protected board members when acting collectively as a board.[222] Rehn v. Fischley, 557 N.W.2d 328 (Minn. 1997). It acknowledged that "it is a longstanding tenet of corporation law that a member of the board has no authority to act individually unless specifically authorized by the corporate bylaws or articles of incorporation." However, the court noted that the statute protects more than directors. It also protects officers, trustees, members, and agents, and these individuals (unlike directors) can act individually rather than collectively. The court concluded that "a director acting outside the specific scope of his or her duty as a member of the board will receive the statute's protection so long as the director is acting on behalf of the nonprofit corporation."
• A New York court ruled that a "charitable immunity" law granting limited legal immunity to the uncompensated directors of a nonprofit organization did not protect a church's trustees from liability for the sexual misconduct of their minister.[223] Karen S. v. Streitferdt, 568 N.Y.S.2d 946 (A.D. 1 Dept. 1991). See also Kamchi v. Weissman, 1 N.Y.S.3d 169 (N.Y. App. 2014).

Gross Negligence

Church leaders should be familiar with the concept of gross negligence, for the following three reasons:

(1) Punitive damages. Courts can award "punitive damages" for conduct that amounts to gross negligence. Punitive damages are damages awarded by a jury "in addition to compensation for a loss sustained, in order to punish, and make an example of, the wrongdoer." They are awarded when a person's conduct is particularly reprehensible and outrageous. This does not necessarily mean intentional misconduct. Punitive damages often are associated with reckless conduct or conduct creating a high risk of harm. To illustrate, in one case a punitive damage award was based on the fact that church officials repeatedly and knowingly placed a priest in situations where he could sexually abuse boys and then failed to supervise him and disclose his sexual problem. Clearly, church officials did not intend for the priest to molest anyone. But, under the circumstances, the jury concluded that the church's actions were sufficiently reckless to justify an award of punitive damages. Church leaders must understand that reckless inattention to risks can lead to punitive damages, and that such damages may not be covered by the church's liability insurance policy. It is critical to note that many church insurance policies exclude punitive damages. This means that a jury award of punitive damages represents a potentially uninsured risk. Accordingly, it is critical for church leaders to understand the basis for punitive damages, and to avoid behavior which might be viewed as grossly negligent.

(2) Loss of limited immunity under state law. State and federal laws provide uncompensated officers and directors of nonprofit corporations (including churches) with immunity from legal liability for their ordinary negligence. This is an important protection. However, such laws do not protect officers and directors from liability for their gross negligence.

(3) Personal liability. Church leaders who are guilty of gross negligence are more likely to be sued personally than if their behavior is merely negligent. Indifference by church leaders to information that clearly demonstrates improper behavior by a staff member or volunteer worker can be viewed by a court as gross negligence, and this will make it more likely that the church leaders will be sued personally.

Volunteer Protection Act

In 1997 Congress enacted the Volunteer Protection Act (42 U.S.C. § 14501) based on the following findings: (1) the willingness of volunteers to offer their services is deterred by the potential for liability actions against them; (2) as a result, many nonprofit organizations have been adversely affected by the withdrawal of volunteers from boards of directors and service in other capacities; and (3) due to high liability costs and unwarranted litigation costs, volunteers and nonprofit organizations face higher costs in purchasing insurance, through interstate insurance markets, to cover their activities.

The Act clarifies that it "preempts the laws of any state to the extent that such laws are inconsistent with this [Act] except that this [Act] shall not preempt any state law that provides additional protection from liability relating to volunteers or to any category of volunteers in the performance of services for a nonprofit organization or governmental entity."

Here is a summary of the Act's main provisions:

• No volunteer of a nonprofit organization shall be liable for harm caused by an act or omission of the volunteer on behalf of the organization or entity if—(1) the volunteer was acting within the scope of the volunteer's responsibilities in the nonprofit organization or governmental entity at the time of the act or omission; (2) if appropriate or required, the volunteer was properly licensed, certified, or authorized by the appropriate authorities for the activities or practice in the state in which the harm occurred, where the activities were or practice was undertaken within the scope of the volunteer's responsibilities in the non-profit organization or governmental entity; (3) the harm was not caused by willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed by the volunteer; and (4) the harm was not caused by the volunteer operating a motor vehicle, vessel, aircraft, or other vehicle for which the state requires the operator or the owner of the vehicle, craft, or vessel to possess an operator's license or obtain insurance.
• The Act provides no protection to nonprofit organizations themselves.
• Punitive damages may not be awarded against a volunteer unless the victim proves by clear and convincing evidence that the harm was caused by the volunteer's willful or "criminal misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed."