for Christian Charities in Canada

Top Ten List of Liability Risks

Robertson Hall has a unique cross-Canada perspective on Christian ministries through the patterns and precedents of our client claims, including:

Frequency of liability claims Amount of settlements and court awards Who is being sued and why

6000 client organizations and 35 years experience

The liability climate in North America is ever-changing and evolving based on social trends and expectations, and by the common law precedents set in our civil courts!

Test your Liability IQ

Do you know?

What type of liability claim against individual Christian charities has the highest potential for awards and settlements?

Injuries suffered by individuals as passengers in owned or non-owned vehicles during sponsored programs, outings and events

Can board members as directors of an incorporated charity be sued personally?

True or False

Yes

Can members or volunteers of an unincorporated association be sued personally?

True or False

Yes

Is it possible for a non-profit or charity to be held vicariously responsible and legally liable for the actions of an employee or volunteer?

Yes or No

Even if it is “outside” the operating hours or scope of the organization’s sponsored programs?

Even if it is away from the premises? Even if an injury takes place

elsewhere in the world?

True or False

Yes, Yes

and Yes!

What is the most frequent liability claim against churches and Christian charities?

What is Your Guess

Bodily Injury Claims Children and youth in

recreation and/or sports programs (on or off-premises)

Adults in slip and fall claims on your premises

What is the highest civil damage award in a Canadian court resulting from an accident involving one person suffering a permanent and serious injury?

Your best guess?

$18,400,000.00A September 2009 Ontario court

award to a 22-year female passenger who suffered a

traumatic brain injury from an automobile accident

Note: accident occurred in 2003

Care to Speculate?

What percentage of liability claims and suits actually go to court?

Most reliable sources estimate that only 5% to 15% of lawsuits ever result in a civil court award.

The vast majority are dismissed or withdrawn following examination for discoveries or at some other point during the pre-trial negotiations, or are settled out of court, usually with the condition that the terms of the settlement between all parties remain confidential.

And finally …

What about abuse claims?

Claims arising out of abuse, molestation and harassment are a very real and present concern for youth and child serving organizations and their insurance companies

For those organizations (and their board members) who have not implemented or properly maintained abuse prevention plans, the risk of abuse claims and civil damages is enormous!

“It’ll never happen here”

“You may be right … it will never happen here,

but on the other hand …it may have already happened

and you just don’t know it … yet”

Examples are of the greatest practical value as they serve both as a lesson and cautionary tales for others.

It is vitally important for board members, executive directors and ministry leaders to have a clear understanding of the risks associated with their ministries and programs, the trends in legal liability in our society and an awareness of what is actually taking place in civil courts.

Only then can they make wise, informed decisions and take effective action to reduce the risk of injury and damages by ensuring the safety of their employees, volunteers and participants thereby avoiding unnecessary and preventable liability claims against their directors and their charitable assets.

Examples are from actual claims and the criteria for their inclusion in the Top 10 List is based on:

SEVERITY of the claim (measured in injuries and the size of potential civil damages), or FREQUENCY of the claim (how often such claims happen).

Risk Management 101- Identifying- Reducing- Eliminating- Transferring

Identifying

Identifying the risks associated with your organization’s ministries, programs, events and contractual obligations.

Clearly understanding and prioritizing those risks is often the biggest step toward managing them effectively.

Reducing

Reducing the risks identified so that you can safely manage them through:

Legal risk management e.g. incorporation, updated constitutions or by-laws, the creation of parallel foundations, the use of contracts for service, formalized employment contracts and membership agreements, etc.)

Responsible practices, procedures and policies (e.g. employment practices, abuse prevention policies, sound governance procedures, etc.)

Eliminating

Eliminating those risks that are not core to your organization’s mandate and for which your organization does not have the personnel, expertise, equipment or financial resources to manage safely and effectively

Our testimony in Christian ministry should never be second rate!

We should always meet or exceed society’s standards

Faith shouldn’t be used as an excuse

Transferring

Transferring the remaining risks with potential for substantial civil liability damages through effective insurance protection

(i.e. the origin of insurance is sharing risk by pooling smaller premiums contributed by the “many” to pay for the larger losses suffered by the few)

Top Ten Liability Risks

Top Ten Liability Risks

Transportation Physical and Sexual Abuse Sports and Recreation Short Term Missions Slip and Fall Claims Employment Practices Outside User Groups Breach of Fiduciary Duties Counselling Services Discriminatory Practices

Disclaimer

The names, locations and full details of claim case studies have not been disclosed, in order to respect and maintain client confidentiality.

Case Study #1

Transportation

The “hidden” risk for charities and non-profits

Transportation tales …

Inquire whether the proposed use of their vehicle in your operations or event is acceptable within their personal auto insurance policy rating and coverage conditions.

Ensure that they have sufficient and/or increased personal Third Party Liability coverage limits and consider a personal Umbrella liability policy providing excess coverage limits up to $5,000,000 or more, especially if they are regularly transporting passengers.

Transportation Checklist

Case Study #2

Physical and Sexual Abuse

For children and youth-serving organizations, abuse claims remain the number one liability risk!

Physical and Sexual Abuse

An effective abuse prevention plan such as “Plan To Protect (3rd Edition)” is required to qualify for abuse liability protection

It is extremely important for charities with children’s and youth programs to actively maintain their abuse prevention plans, conduct annual training seminars, screen workers regularly (minimum of every 3 years) and to keep up to date with changes to procedures for criminal record checks and vulnerable sector screening

Physical and Sexual Abuse

More detailed information on abuse prevention and screening will be provided in the Safe Place presentation, workshops and abuse panel discussion later today

Physical and Sexual Abuse

Case Study #3

Sports and Recreation

Churches, schools, campgrounds and other youth-serving organizations conduct sports programs, special events, leagues, training camps and exhibitions to attract and keep young people in their programs. Increasingly, Christian ministries are also sponsoring higher risk or extreme sports such as skateboarding, waterskiing, rock climbing, white water rafting or canoeing, wilderness tours and contact sports to compete for the attention of teens and pre-teens. This trend places churches and charities at greater risk of injury to their participants and guests, as well as greater exposure to legal liability claims.

Sports and Recreation

Sports and Recreation

Communicate all sports activities with your insurance provider to Check that your liability insurance policy does not include a “participants

exclusion” Maximize the amount of your liability protection through increased primary

coverage limits and/or an Umbrella Liability policy Consider the addition of a no-fault accident benefits policy to provide

medical, dental and accidental death and injury indemnities for participants.

Obtain signed informed consent and parental permission registration forms from parents or guardians clearly outlining the details, location and inherent risks of any sports or recreational activities in which their son or daughter will be participating.

Do not offer sports or recreational programs if your organization does not have the personnel, expertise, experience and financial resources to provide first rate equipment, training and supervision to ensure the safety of participants.

If possible, transfer the risk to the professionals by holding sponsored events at commercial facilities who are in the recreational business and who have the experienced staff, facilities, safety equipment and liability insurance to reduce the risk of injury and protect your organization by having the resources to pay damages in the event of an accident.

Sports and Recreation

Case Study #4

Short Term Mission Trips

Global missions can be an exciting, rewarding and life changing experience for Christians who want to put their faith into action

But the developing world presents unique risks that North Americans often do not understand and are not prepared for.

There is a world of difference from a risk and legal liability standpoint between participants on short term mission trips and those who are career missionaries in the field. The former is often adventure-seeking, unaware of risks, has a lower level of commitment or loyalty to the organization, has a career, family dependents and a full life of potential lost income ahead, and is much more like to sue the sponsoring organization due to an injury, disability, disease, etc. For the career missionary this is often a lifetime vocation and involves a high level of commitment to the organization and cause, more awareness and assumption of risk in their chosen home and much less likelihood that they or their dependents and family would sue.

Short Term Mission Trips

Short Term Mission Trips

Detailed information regarding the risks associated with short term missions and some specific risk management and insurance tips will be presented in my workshop entitled “Protecting People Worldwide”.

Short Term Mission Trips

Case Study #5

Slip and Fall Claims

Organizations who own, lease or have custody and control of a premises have a potential legal liability exposure under what is known as “occupier’s liability” for claims, accidents or injuries to employees, members, guests, participants and other third parties on the premises.

The owner or occupying organization must ensure the safety of the premises for the benefit of those third parties by ensuring that there are no unsafe conditions, inherent dangers or attractive nuisances that might create an unreasonable risk of injury to those on the premises.

Slip and Fall Claims

Slip and Fall Claims

It is important for your board members and staff to be vigilant about maintaining the building and premises safely and in accordance with the same standards as at any workplace, school or public building. _______________________________________________________________

Interior: Keep all lighting in good working order Repair loose carpeting or treads on

stairways Keep doorways, exits and hallways free

of clutter Avoid the use of temporary structures

and extension cords in high traffic areas

Remove equipment, furniture or furnishings that pose a safety hazard or are no longer in accordance with current ULC or CSA requirements.

Outside: Regular clearing of snow and ice from

parking lots and walkways Repair potholes and uneven pavement

surfaces Ensure sufficient exterior lighting, Use commercial grade playground

equipment Post signs and provide appropriate

supervision for children around areas of attractive nuisance or inherent danger on your premises.

Case Study #6

Employment Practices

Employment Practices

Ensure that your organization has employment practices and wrongful dismissal coveragein your Directors and Officers Liability Policy (i.e. D&O Policy) or as part of a separate Employment Practices Liability policy (i.e. EPL Policy)

Standard limits available are $1,000,000, $2,000,000 and $5,000,000

The recommended amount of coverage is dependent upon your organization’s operating budget size, number of employees and potential for civil damages.

A big advantage of D&O and/or EPL coverage is the right and duty of the insurance company to defend the organization as policyholder.

The legal defense costs associated with an insurable claim, particularly one that ultimately goes to court, can exceed the actual amount of an award or settlement.

Employment Practices

Case Study #7

Outside User Groups

Church congregations and boards should either prohibit outside use of their properties or establish clear facility use guidelines that outline the rules, regulations, requirements and prohibited occupancies

Special care must be taken to avoid inconsistent eligibility guidelines or rental costs that could invite allegations of discrimination

Rental/occupancy agreements should require outside user groups to provide formal written proof of primary liability coverage (minimum limit of $2,000,000 per occurrence) with the host organization (i.e. building owner) named as additional insured. This documentation should be provided prior to use of the facility.

Contractors, sub-trades, landscaping and snow removal services should also be required to provide proof of insurance for bodily injury or property damages for which they are responsible on your premises

Outside User Groups

Case Study # 8

Breach of Fiduciary Duties

Breach of Fiduciary Duties

In 1987 the first successful civil liability judgment in Canadian courts was awarded against a non-profit board for breaching their fiduciary duties.The frequency and severity of claims against non-profits and charities has increased dramatically. Fiduciary duties are those special duties of care, obedience, loyalty, good faith, and so on, that are required in a fiduciary relationship when directors and officers are required in the best interests of a beneficiary, trust or in the case of a charity, its donors. A breach can include a wrongful act, error, omission, breach of duty, neglect of duty or misstatement and can relate either to specific decisions or to general policies and procedures that are the responsibility of the fiduciaries, whether they be directors and officers of an incorporated entity, or board members of an unincorporated association. Claims can occur in small organizations operating on shoe-string budgets with “hands on” board members or in large charities whose leadership, authority and control between directors and management is based on some variation of a Carver model of governance.

Examples of claims can be wide and varied, so rather than providing one case study,

following are examples of actual or alleged breaches of fiduciary duties against Christian

charities in Canada:

1. Using donor designated funds for current operating expenses due to a downturn in revenues and then not being able to return them for use as intended by the donor, resulting in a legal obligation for the directors to reimburse the lost donations out of their own personal assets

2. Under-remitting source employment tax deductions and being held responsible to pay for the shortfall, including penalties and interest

3. Entering into the development and sale of charitable property for life lease residences through a bare trust arrangement and having purchasers collectively sue the charitable board for over $1,000,000 to make good on upgrading the deficiencies and lack of amenities relative to the original advertised features

4. Being sued for alleged fraud and breach of duty committed by a minister who attracted members of the church to invest in a business he operated on the side, which resulted in substantial loss of members’ life savings

5. Making contracts with individuals or businesses for use of charitable property and premises and then reneging on the lease due to safety concerns or statement of faith conflicts, resulting in loss of revenue by the third party

6. Dismissing volunteers in positions of spiritual leadership over lifestyle issues, in absence of a lifestyle agreement, and as a result being sued for injury of reputation and loss of income

7. Issuing charitable receipts to donors for Christian education or missions travel for the personal benefit of parties related to the donors and as a result, having the receipts revoked by Canada Revenue Agency and the tax deductions disallowed, resulting in civil action by donors who were told by the charity that the arrangement was legal and acceptable

Case Study #9

Counselling Services

Counselling Services

Churches and Christian charities are increasingly involved in counselling activities that go beyond the traditional scope of religious and spiritual care.

Such activities now involve a wide variety of services including guidance and life skills training, including assistance to new Canadians with finances, housing, schooling and employment.

The biggest liability risks posed by counselling are in the following areas:

(1) Content or advice contained in written and verbal counselling(2) Breach of confidentiality (3) Improper counsellor/client relationship

Counselling Checklist

Limit scope of counselling activities so as to recognize the professional limits of the counsellor’s expertise and training, and the legal limits of religious therapy.

Decline or refer counselling cases requiring specialized psychological or medical requirements to qualified health care professionals.

Counsellors or therapists who are hired on a contract basis or who have private practices on your premises should provide proof of their own primary counselling liability insurance coverage.

Adopt an “open door” and/or “team counselling” approach in order to discourage allegations of abuse or harassment.

Make a continuing education requirement for ministers and counsellors and keep current on legal issues and legislation affecting your counselling ministry (e.g. Bill 171 in Ontario)

Allow sufficient time off for counsellors to “regroup” to prevent burn out, abuses or excesses.

Establish a degree of accountability between staff or volunteer counsellors and your board members.

Maintain confidential notes and records of counselling sessions, including dates, times, topics discussed, comments and recommendations.

Refrain from the use of terms such as “professional counselling” or “counselling services” in your advertising or ministry descriptions, unless your counsellors hold recognized degrees and are active members of self-regulating professional associations to whom they are accountable and are subject to discipline. Instead, use such terms as pastoral care, support, insight, shepherding, spiritual guidance, etc.

Have those individuals seeking counselling or guidance sign a written agreement in advance which includes an acknowledgement of the scope and limitations of the services offered an a release of legal liability against the organization and its directors, employees, members and volunteers.

Counselling Checklist

Discriminatory Practices

Case Study #10

Common law precedent has upheld the right of faith-based organizations to discriminate on the basis of religious beliefs in hiring or firing practices for certain positions of spiritual leadership (i.e. ministers, teachers of a Christian school, a chaplain, etc.)

Civil courts have also made it increasingly clear that the employee in question must have consented to having read, understood and agreed to the organization’s Statement of Faith and a very clearly worded Lifestyle Agreement that spells out the types of behaviour and actions that are grounds for dismissal.

Employment or contract positions in a Christian organization considered vital positions of spiritual leadership, such as administrative, maintenance and other roles, cannot be hired or fired based on the individual’s personal religious beliefs, even if a Statement of Faith and Lifestyle agreement were signed.

With respect to membership in a church or religious order, it is possible to determine membership on the basis of the individual’s agreement to abide by the organization’s faith beliefs, but termination of such membership without signed formal consent in a membership covenant that includes a specific Statement of Faith and Lifestyle Agreement may not be legally enforceable, or may attract the potential for civil damages.

Discriminatory Practices

With respect to rental of your premises to outside individuals, groups or organizations, it is important to have property use guidelines that spell out which types of rentals and occupancies are eligible based on size, nature or risk. However please remember that if you are renting your premises to the general public, you cannot discriminate as to eligibility or rent based on the ethnicity, religious beliefs or lifestyle of the user group or its members.

Keep in mind that the costs, defense and any resulting fines or penalties associated with a provincial human rights tribunal or proceeding is not generally insurable under a contract of indemnity such as insurance. Firstly, because fines and penalties are not insurable by law. And secondly, because human rights proceedings are not in accordance with due process or natural law. Fortunately however, these fines and penalties are relatively modest. However if a lawsuit based on discrimination is brought in a civil court, it may be insurable under the personal injury section of a general liability policy.

Discriminatory Practices

Thank you!

Disclaimer: The information contained in this seminar has been compiled by Robertson Hall Insurance Inc. to assist churches, charitable organizations and their leaders in better understanding insurance and legal issues and to help in reducing or eliminating foreseeable and preventable risks associated with their ministries, programs, operations and events. However, your organization may have insurance requirements and risks that are unique to your premises or operations which are not addressed by this seminar and should be specifically reviewed with the appropriate qualified professional. This publication may not be reproduced in any way without the written consent of Robertson Hall Insurances Inc.