Management liability is the coverage churches understand least and under buy most. It bundles directors and officers liability, which protects the board and the organisation for decisions made in governance, with employment practices liability, which responds to claims from employees. For a church of 500 or more with twenty or more people on payroll, it is also the line where we most often find a limit that has not been revisited in a decade.
We regularly review church programs carrying a one hundred thousand dollar management liability aggregate across twenty plus employees. That figure was probably appropriate when the church had four staff. It is not appropriate now, and the reason is defence costs.
Defence costs are the whole problem
Most management liability policies pay defence costs from inside the limit. Every dollar spent on lawyers is a dollar unavailable to settle. A contested employment claim that runs to depositions can consume six figures in defence before anyone discusses a resolution, and a church with a one hundred thousand dollar aggregate reaches the end of its coverage while the claim is still live.
The first question is therefore not what is our limit, it is do defence costs erode it. Ask explicitly. The answer changes what an adequate limit looks like.
What drives the exposure up
| Factor | Why it matters |
|---|---|
| Employee count | The single biggest EPL rating factor. Twenty employees is a different risk from five |
| A school | Annual contracts and non renewal decisions generate disputes |
| Terminations in the last three years | Underwriters ask, and recent terminations raise both price and scrutiny |
| Endowment or investment assets | Brings fiduciary questions into D&O territory |
| Board turnover and governance documents | Weak or outdated bylaws increase the odds of a governance dispute |
Want your limit checked against your headcount?
Send the management liability declarations page. We will tell you where the limit sits relative to churches of similar size and staffing. Request a free church risk assessment or call 978.712.0111.
What else belongs in the conversation
Third party EPL, which responds to harassment or discrimination claims brought by non employees such as congregants, volunteers or vendors. Many church policies exclude it and many churches assume it is included.
Wage and hour coverage, which is frequently excluded or limited to a defence only sublimit. A church running a school, after school care and summer camps has genuine wage and hour exposure.
Fiduciary liability for the retirement plan, which is distinct from D&O and is sometimes assumed to be bundled when it is not.
And the definition of insured persons. Confirm that it reaches volunteers serving on the board, committee members, and employees of a separately incorporated school if you have one.
Questions boards ask
Our board members are volunteers. Are they not protected by statute?
Volunteer protection statutes exist in various forms and offer meaningful but incomplete protection. They generally do not prevent a suit from being filed or fund the defence, and they do not protect the organisation itself.
What limit should we actually carry?
For a church with a school and twenty or more employees, the conversation usually starts at one million rather than ending there, and the answer depends heavily on whether defence costs erode the limit. A smaller limit with defence outside it can outperform a larger limit with defence inside.
Does our general liability cover employment claims?
No. General liability excludes employment related practices. This is the single most common misunderstanding we encounter on church programs.
Our policy expired and nobody noticed. What now?
It happens more than you would expect, because management liability often sits with a different carrier on a different renewal date from the package. Claims made coverage also means a lapse can leave you without protection for conduct that occurred while you were insured. Check the date today.
Not ready for a full review? Start with our church insurance checklist, a short list of the coverages and limits worth confirming on your current policy before you talk to anyone.
If you would like a second opinion on whether your management liability program is properly structured for insurance purposes, contact us for a free church risk assessment.
Contact Hale Street Insurance at 978.712.0111 or [email protected] for a free church insurance review. You can also visit our church insurance page or request a quote to get started.
Jake Lubinski is the founder of Hale Street Insurance and a licensed insurance broker with years of church board and stewardship experience. Based in Boxford, MA he works with churches throughout Massachusetts and the US to build insurance and risk programs designed around how ministry actually operates. Reach Jake at [email protected] or 978.712.0111.
Related reading: Church Governance and Board Liability | Board Member Personal Liability | Teacher Employment Practices Liability at Church Schools | Church Employment Practices Liability
