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10 Common Coverage Gaps To Avoid

By January 10, 2019Liability

Even the most careful people sometimes have insurance gaps that could put themselves or the ministry in danger. We have identified ten common gaps often found in policies that you need to be aware of and consider supplementing coverage for those gaps where necessary or available. Please note that these gaps may not apply to all policies, but its fairly commonplace among multiple carriers. Of course, your insurance agent should be able to clarify if these do or do not apply to your specific policy.

  1. Cyber Liability: This exposure is not covered under most insurance policies (although some may include nominal coverage, generally inadequate for your best protection).  Your “cyber” exposure could be related to Social Media, Data Breaches, or even Cyber Extortion.
  2. Hired & Non-Owned Auto: Hired (vehicles you rent) and Non-Owned (personal vehicles volunteered for trips, errands, etc.) auto coverage is an essential but optional and oftentimes overlooked coverage. This provides defense and liability coverage from hired and non-owned auto claims which are often catastrophic in nature.
  3. Rental Cars: Damage to a rental vehicle resulting from an accident, theft, broken windshield, or vandalism is not covered under many policies. Some mistakenly believe that if they have coverage for their own church vehicles, this somehow extends to a rental vehicle, but that is not the case. We recommend that you purchase the physical damage coverage offered by the rental agency (typically referred to as the loss damage waiver.) Even if your policy might include this coverage or if it’s available by endorsement for a fee, we still recommend purchasing this coverage because the loss of rental value while that vehicle is in the shop is an expense you may be liable for and one not often covered under your policy.
  4. Coverage When Others Use Your Property: We could spend a day talking about this but in short and to avoid exposing your organization to claims for when others use your property, (1) Have the organization using your property name your organization as an “Additional Insured”  on their liability policy, and (2) Have the outside group sign a “Facilities Use Agreement” that includes the requirement of needing to be listed as an Additional Insured. This provides the group with a license to use the property, has hold harmless and indemnification causes, and states that the church provides no supervision or control over the property when being used by the group. The Facilities Use Agreement should ideally be prepared by an attorney.
  5. Special Events: Many carriers have a liability exclusion for certain “Special Events” such as those involving fireworks, mechanical rides, events with animals, events involving the use of firearms, events with contact sports, etc. If you are doing anything “outside the normal scope of your operations,” please be sure to check with your insurance carrier to see if you need to obtain a special events policy.
  6. Medical Payment Coverage for Athletic Events: Consider the scenario where the church has a sporting event on their campus and a participant is injured in the event. Many insurers exclude coverage under the medical payments portion of the policy if related to an athletic event. Note that the athletic event does not have to be an organized event, it can be any athletic event. A good remedy for this is to purchase an Accident Policy to fill this gap.
  7. Employment Practices Liability: This is a significant exposure for the church. Many of our liability driven claims come from this exposure. This is where the EEOC claims typically come from such as: Wrongful Termination, Age Discrimination, Racial Discrimination, and other types of employee related discrimination.
  8.  Workers Compensation: Every organization in Texas has worker’s compensation. It just depends on who finances it – you or the insurance company. With Texas being the only state that does not make workers compensation mandatory, in the absence of this coverage you need to understand that you lose all common law defense against an injured employee and are subject to the state mandating how much and how long you will pay an injured employee. While you have the option of not carrying insurance, this does not relieve you for being liable for any injury ( or employment related sickness) payments. A common misconception is that this coverage is expensive. For what it provides, its among the least expensive of most coverages.
  9. Ordinance & Law: Many insurance companies have this coverage built into their policies, but the coverage can easily be inadequate given the right circumstances.   Here’s a brief example:  The church has a fire that consumes 60% of the building. Because the majority of the building has to be rebuilt, the city determines the remainder of the building must be brought up to current building/safety code and consequently requires the facility to be brought up to code, including the being fully sprinklered. In addition, the possibility exists that now the undamaged portion has to be significantly modified to accommodate these new codes.  You many have an additional cost for the damaged portion of the building to be brought up to code and add to that, the additional cost related to the undamaged portion of the building ( which can only be covered via the Ordinance & Law coverage.) This can quickly add up to much more than the stated limit, and is especially true for older buildings. Many policies provide only $100,000 to $300,000 for Ordinance & Law coverage so be aware of this and determine if you need to discuss higher limits of coverage with your insurance agent. 
  10. Sexual Abuse: We will cover this in more detail in future articles, but when sexual abuse of minors is the number one reason churches have gone to court in the last five years, it deserves our attention on many levels. Even with this information, many churches do not carry this coverage or do so in small limits. For maximum protection, you should look at carrying as high a limit as you can afford. Be aware that most carriers will require certain screening measures to be in place for the higher limits, but in today’s society, we should be doing everything possible to protect all minors under the church’s care while at the same time, protecting the church and its ministry.