If members of a ministry governing board take a stance that’s in keeping with the biblical beliefs of the ministry, and if the leaders are sued by an individual who disagrees with that stance, it makes sense for the ministry to reimburse its leaders for their out-of-pocket costs associated with defending the lawsuit, along with costs associated with a judgment that could result from the lawsuit.
On the other hand, if a ministry employee engages in criminal activity and is sued, it’s unlikely that the organization would want to be obligated to defend the employee, or to pay for court awards that are levied against him or her.
Whether the ministry is obligated to cover litigation-related expenses of its workers is typically governed by indemnification provisions contained within the ministry’s bylaws. Obviously, such a provision can be very valuable to the ministry workers being indemnified, but it can be potentially costly to the ministry, depending on the amount of out-of-pocket expenses incurred.
It’s important that ministry leaders review the organization’s existing bylaws and think through the indemnification process before a lawsuit is filed against the organization’s leaders, employees or volunteers.
The purpose of including an indemnification provision in a ministry organization’s bylaws is to protect individuals who are working for the ministry from incurring out-of-pocket costs if they’re sued in connection with their work on behalf of the organization. Indemnification provisions are intended to protect individuals from legal defense costs as well as legal judgments arising out of the individual’s involvement in the ministry.
Who Should Be Covered: The ministry will usually want to draft an indemnification provision to protect its leaders and employees. Some ministries may also want to extend this protection to volunteers who are working on behalf of the ministry.
Who Should Not Be Covered: Indemnification provisions need to be carefully drafted so that the ministry is able to avoid paying the legal expenses of individuals who are not furthering the purpose of the ministry, or who are acting outside of their authority. For example, the ministry does not want to be obligated to cover legal costs associated with sexual misconduct, physical assault or theft that an individual admits to engaging in while working for the ministry.
Commercial liability policies will cover defense costs and judgments associated with many types of civil lawsuits that are directed against the ministry, its leaders, employees and volunteers. To the extent that the organization’s insurance policy covers such costs, there’s no need to indemnify the individuals who are protected by insurance. It’s only when insurance coverage doesn’t apply, or when cost exceed the limit of liability coverage stated in the policy that out-of-pocket legal costs are incurred. For this reason, it’s a good idea to reference insurance coverage within the indemnification provision.
If an individual is sued in connection with his or her ministry work, it’s recommended that the bylaws give the organization’s governing board the right to decide when and if such individual will be indemnified for out-of-pocket costs associated with the lawsuit. By incorporating this type of provision, ministry leaders are granted the discretion to assess whether the individual being sued was truly acting on behalf of the ministry and furthering the ministry’s purposes when the loss occurred.
If an organization’s bylaws already include an indemnification provision, it’s recommended that a locally-licensed attorney review the bylaws to ensure that ministry leaders maintain the right to decide when and if the indemnification obligation is triggered. If the organization’s bylaws do not contain an indemnification provision, then an attorney familiar with ministry governing documents should be consulted to develop indemnification wording, as well as to walk the ministry through the process of amending its bylaws.
It’s important that ministry leaders review the organization’s existing bylaws and think through the indemnification process before a lawsuit is filed against the organization’s leaders, employees or volunteers. A set of sample indemnification provisions are also available to share with your attorney as a starting point for consideration.
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