My father was a small business owner when I was a child. I remember vividly one very bad day for his business. In the course of normal operations that day, the business received a summons indicating it had been sued by one of its customers. For a small business, this was disruptive news. Did the suit have merit? How much would this cost the business if so? If not, how would the entity best defend against the suit? How would proper legal counsel be secured, and how much would that cost? The suit ultimately proved to be without merit, but the day on which the notice arrived was still a difficult day.

A church, like any other business entity, can be sued by anyone, at any time, for any reason. The lawsuit may prove to be without merit and subject to dismissal, but that does not prevent someone from bringing a suit and leaving the church to deal with the sudden stress and uncertainty that comes with being sued.

Churches can be sued for a variety of reasons including slip & fall accidents on the church property, child abuse allegations in church classrooms, auto accidents during church-sponsored outings, decisions made by the church board, food poisoning at a church dinner, or alleged misuse of a donation.

The church entity itself can be subject to a lawsuit via theories of vicarious liability for actions or omissions of board members, staff members, and even volunteers.  While federal law often shields volunteers themselves from liability when they are acting in good faith, liability may still rest on the church for those same actions. 

Employment issues can also give rise to liability. Churches can be sued by third parties under theories that they negligently hired an employee, or that they did not take proper care in monitoring an employee after hiring. A disgruntled former employee may sue for the manner in which he or she was dismissed from their staff position.

While this potential liability may seem alarming at first, a church can protect itself from many forms of liability by taking a few actions. 

First, a church should obtain church liability insurance. Such a policy is a church’s best line of defense for dealing with potential lawsuits.

The church liability insurance pays for claims of liability, assuming the claims are within the scope of coverage provided by the policy. Further, a church’s liability carrier will provide and pay for an attorney’s services when required to defend against a lawsuit within the scope of coverage.

Any time a church is sued, or even threatened with litigation, the first step to take is to contact the church’s insurance carrier, notify them of the issue, and follow the instructions the carrier provides. 

Second, a church should review its insurance coverage on a periodic basis to ensure that the activities that could potentially lead to liability are squarely within the scope of the church’s insurance coverage.

Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.

This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.

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