Umbrella for a Rainy Day

By Ryan Sutherland, Colorado Account Executive

There are so many insurance policies to consider when it comes to protecting your ministry, and keeping track of each one’s coverages can be a mind-numbing task. One that I often hear confusion about is the Excess Liability policy, more commonly referred to as an Umbrella. While these terms aren’t exactly interchangeable in the broader insurance world, they do have a lot of overlap. For purposes of understanding your Brotherhood Mutual policy, they are basically synonymous.

Like the name suggests, an umbrella policy provides extra (or “excess”) liability[1] coverages over-the-top of existing coverages that can be shared by multiple policies. This extra coverage functionally increases the limits of the policies that are under the umbrella. Many people confuse it with their other liability policies, thinking that the umbrella is what provides the liability protections they would need if they faced a lawsuit. However, the purpose of the umbrella is simply to increase limits that already exist in your other policies, and it is typically subject to all the conditions and exclusions of the underlying policy or policies.

How do I know if our ministry needs an umbrella policy?

The primary reason for an umbrella liability policy is to protect the ministry and its volunteers/leaders from financial disaster if a major accident or lawsuit were to occur. To determine if you need one, you must consider the potential disastrous exposures of your ministry that could lead to the exhaustion of your underlying policy limits.

Every insurance policy has a per-occurrence limit for each line of coverage. In your Brotherhood Mutual policy, the per occurrence limit applies to a judgment or settlement rendered by a court or arbitration to settle a claim. The legal fees and defense costs associated with a claim are “outside the limits,” which means Brotherhood[2] will pay whatever is necessary to defend you against a claim until your limits are exhausted. The key question, therefore, regarding whether you need an umbrella is: will the per occurrence limit suffice to cover all potential damages awarded to a claimant (or claimants)?

What are the most obvious exposures that might require an umbrella policy?

  1. Do you have a large building or campus? Or do you operate at more than one location on a single insurance policy? Large buildings/campuses, as well as multi-sites, present greater risk for more people onsite at any given time than a ministry with a smaller footprint. Wherever you have people, you have more opportunity for accidents, nefarious behaviors, and the potential for multiple injuries from a single incident.
  2. Do you have a 15-passenger van or a church bus that you transport people in? Just imagine for a moment a dozen youth in your van getting in an accident because your youth leader got distracted while driving (not hard to imagine with a dozen kids in the vehicle!). If there’s even one fatality or a dozen kids injured because of this accident, you could easily exhaust your $1 million auto policy limit. That wouldn’t even begin to cover any damages or injuries to other drivers involved. Even if the driver isn’t at fault, the church could be sued and found responsible—especially when children are involved.
  3. Do you have a volunteer safety/security team? Are there any armed members of the team? How many armed members are there? Security teams are becoming an essential ministry team for many churches today. While Brotherhood’s policy provides excellent coverage for these individuals serving in this capacity, this coverage is limited to $1 million per occurrence. How far would this $1 million go if multiple safety team members were named in a lawsuit and the court decided they used too much force in their response during a high-stress situation? Brotherhood’s umbrella coverage includes your “security operations” endorsement.
  4. Do you have a board of directors, elder board, board of trustees, or council that has more than 4-5 members? Boards and councils are typically made up of quite a few individual people who would likely all be included in a lawsuit against the ministry. While they are covered individually for their decision-making role by your policy’s Directors and Officers Liability[3] coverage, this coverage is limited to $1 million per occurrence. How far would $1 million go if a court decided your ministry is responsible for financial damages and those individuals were also declared responsible as decision makers? Do you want your volunteer leaders to face financial ruin because of their role?

Each of these questions highlights potential exposures that could result in a claim or multiple claims that could easily exhaust the underlying limits of your policy. If you answered “yes” to any of these questions, then your ministry should consider an umbrella policy. They typically cost around $450 per million of coverage and can go over the top of most of the coverages you already have in your policy. Your agent can help you determine your exposures and how best to get the coverage you need.

 


[1] An umbrella does not increase or add any additional coverage to your policy’s property limits. It applies to liability coverages only.

[2] This is not the case with all insurance policies, so make sure you understand how your policy covers defense.

[3] Make sure your policy includes Directors and Officers Liability. I see many ministry policies that don’t have this coverage at all.

 

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There are so many insurance policies to consider when it comes to protecting your ministry, and keeping track of each one’s coverages can be a mind-numbing task. One that I often hear confusion about is the Excess Liability policy, more commonly referred to as an Umbrella. While these terms aren’t exactly interchangeable in the broader insurance world, they do have a lot of overlap. For purposes of understanding your Brotherhood Mutual policy, they are basically synonymous.

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