A: Modern services such as Uber®, Turo®, and Airbnb® enable ministries to profit by making assets (vehicles and residences) available for hire to the public. While using these services to make money may be appealing, it’s important to think about the potential liability and whether the ministry has adequate insurance coverage.
Brotherhood Mutual’s Legal Assist team addresses common questions surrounding these peer-to-peer business opportunities to help your ministry make a more informed decision. Ministry leaders should speak with an attorney and insurance agent if they have any questions about liability exposures and insurance coverage options.
Personal Auto Policies almost always exclude coverage for an insured vehicle when it is used to transport people or goods for a fee (often called public or livery conveyance). Additionally, insurance companies in nearly all states now use policy endorsements with Personal and Commercial Auto Policies that specifically exclude losses when an insured uses its vehicles as for-hire public transportation and is logged into a "transportation network platform" such as Uber or Lyft® as a driver regardless of whether a passenger is "occupying" the vehicle.
It’s important to verify coverage with your insurance agent. If a ministry’s policy has an endorsement that excludes coverage, the ministry likely would be responsible for any claim made against the ministry in relation to the use of its vehicles for ride or carsharing.
The personal insurance available through companies like Uber and Lyft® typically only provides a minimum amount of third-party liability coverage, and it only applies for the benefit of a driver while he or she is logged in to the service and is awaiting a request. Higher limits of liability coverage and comprehensive and collision vehicle damage coverage are often available only when the driver has accepted a request and is en route to pick up or while transporting a passenger. This coverage would not appear to provide third-party liability protection to the ministry that owns the vehicle. Most ridesharing companies include information about available insurance coverage on their website. Ministry leaders should review the information before deciding to participate. Additionally, there are websites that compare the coverages provided by various rideshare companies.
If the driver obtains a Personal Auto Policy to cover the exposure, endorsements are typically available to ensure that full coverage protects the driver while they are logged in to the service. However, the coverage may not provide liability protection for the ministry’s interests. Ministry leaders can learn more about the insurance available for ride-sharing drivers in this article from the Insurance Information Institute.
While this may seem like a great way to help cover the costs of maintaining a vehicle, it’s important to keep in mind that this is essentially renting a vehicle to others, presenting a significant liability exposure for the ministry. For example, if the vehicle is involved in an accident while it is rented, the ministry will likely be involved in any litigation regarding any bodily injury or property damage that results from the accident—whether the ministry was responsible or not. The ministry’s Business Auto insurance policy may contain an exclusion for this exposure. Even if it’s covered by insurance, the ministry will be responsible for paying any damages that exceed its liability insurance coverage limits.
It’s important to note that the IRS may consider the ministry’s rental of its vehicles unrelated to the ministry’s tax-exempt purposes. In this case, income generated from the rental may be taxable. The ministry’s tax professional can assist it in determining any potential tax implications.
Look at your ministry’s Business Auto or Commercial General Liability policy for hired auto coverage. This is the coverage that applies when a ministry hires, leases, or rents a vehicle. The liability exposure for hiring a ridesharing service is like hiring any other transportation service. If the ministry hires a service with a good reputation and competent drivers, the liability exposure is low.
The IRS may consider personal use of a ministry-owned vehicle to be a private benefit to the individual. Private benefits that fall outside the ministry’s exempt purpose could jeopardize its tax-exempt status. If not properly accounted, the IRS could revoke the ministry’s tax exemption. Ministries should make sure the employee keeps records of both business and personal use, so the employer can properly account for the benefits provided.
Liability increases when vehicles are loaned for personal use. It’s possible that a ministry could be named in litigation under a theory of negligent entrustment if the vehicle is involved in an accident that results in harm to a third party. Negligent entrustment occurs when the ministry entrusts a vehicle to an individual who should not be driving (e.g., driver does not have a license or has a poor driving record).
When renting real estate, consider the potential for injury to renters and the possibility of damage to the parsonage. Ministry leaders should inspect the property and remove or repair any potential hazards before renting. Make sure all smoke and carbon monoxide alarms and any other emergency or safety equipment are in good working order. Ministries should talk with their insurance agent to ensure they have the appropriate coverages for renters. Renting real estate could also jeopardize a property tax exemption provided by the ministry’s state government.
Do you have a question that wasn’t covered in this article? Submit your question to Brotherhood Mutual’s Legal Assist team.
This information is intended to be helpful. However, it is not legal advice, and reading it does not create an attorney/client relationship. Every circumstance is different, and an organization's rights and obligations vary by jurisdiction. That's why we strongly encourage you to regularly consult with a local attorney as part of your risk management program.
The information is accurate as of the date of publication; however, changes in law or regulation over time may affect the accuracy of the information presented.
Thank you for your interest in Brotherhood Mutual. We appreciate the opportunity to provide your church or other ministry with an insurance quote and will reply to your request as soon as possible.
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