When Outdated Bylaws Backfire

Over the course of a year, board members at ABC Church had been hearing rumblings from the congregation, suggesting that their pastor’s beliefs and teachings had shifted away from the mission. The board spoke with the pastor, hoping that the situation would improve over time. The pastor’s behavior remained unchanged and calls for his removal grew louder.

The board made the difficult decision to fire the pastor in response. The pastor sued, alleging wrongful termination. In the lawsuit, the pastor claimed that the board violated church bylaws by dismissing him for a reason not explicitly listed as an actionable offense. When the board reviewed the bylaws, they found that the bylaws had not been updated in 40 years — and that the pastor was right.

Three Reasons a Ministry Leader Could Be Sued

A ministry leader is defined as a pastor, deacon, camp director, nonprofit board member, or any other individual that makes decisions on behalf of a ministry organization. The most common reasons for a lawsuit against a ministry organization and its leaders are:
• Negligence—failure to provide reasonable care
• Misrepresentation—provides false or misleading information
• Employment-related issues—hiring, firing, wrongful termination

“We receive hundreds of queries each year through our Legal Assist^SM response service about board governance and leadership,” said Charles Hedman, associate corporate counsel for Brotherhood Mutual and Legal Assist coordinator. Hedman says that the problems boards and leadership encounter most often deal with leadership issues, communication problems, and liability exposure.

But there are remedies. To help ensure effective board governance, the Legal Assist team offers recommendations on the following five issues.

Modernize Outdated Bylaws

At issue: Outdated bylaws can hinder progress.

What happens when your bylaws haven’t been updated in 25, 50, or even 100 years? Rules, methods, and statements that were written at your ministry’s founding may no longer be applicable. Your bylaws are a legal document that sets rules and procedures for running your ministry. Hedman explains that ministries are bound by their governing documents. “If an audit uncovers issues in your bylaws, make the necessary changes to them,” he said. “Otherwise, you need to adhere strictly to existing documents. Ignoring this could lead to potential legal complications.” Issues can include personal liability, legal investigations, breach of fiduciary duties, and loss of tax-exempt status.

Ace this: Bylaws aren’t static—they need to evolve with your organization and state laws. Discuss with a locally licensed attorney any edits you plan to make. Then, create a process to review your bylaws every three to five years, especially if you experience a substantial change in your ministry, such as church growth or board structure.

Craft Clear Statements of Faith & Purpose

At issue: Ambiguous language can lead to misunderstandings...or a lawsuit.

If it’s been a while since you’ve reviewed your written statements for biblical and creedal foundations, purpose, and core beliefs, a second look may reveal some gaps. Hedman explains that most churches don’t define, or inaccurately define, terms for gender, marriage, or sexuality, creating language that can be misconstrued. For example, some Statement of Faith documents the Legal Assist team has reviewed use the term sex and gender interchangeably. “These two terms have different meanings, leaving your ministry’s use vulnerable to legal interpretation, especially in employment matters,” he said. “In fact, some states have enacted narrow definitions of these terms.”

Ace this: Biblical support for your beliefs and values provides clarity for people who engage with your organization. These documents also help safeguard your ministry in the event of legal challenges to your decisions, communications, and activities. A locally licensed attorney can instruct you about changes to state laws. Hedman also recommends that you require all board members to sign your statements of faith and purpose to ensure alignment with your beliefs.

Shield Leaders with an Indemnification Clause

At issue: Uncertainty can strain relationships between leaders.

An indemnification clause, or “hold harmless” clause, in your bylaws is a statement of organizational intent to protect leaders from out-ofpocket costs if sued for decisions made on behalf of the ministry. An outdated, missing, or unartfully written clause can open the ministry to the same liability issues you were hoping to avoid.

Ace this: Your insurance agent can help you understand how your leadership is covered for civil lawsuits. Your clause should also give the governing board the right to decide when and if an individual will be indemnified. “Indemnification should not necessarily offer blanket protection,” said Hedman. “The clause should not shield individuals whose conduct is criminal or if their decisions are misaligned with governing documents.”

Charitable Immunity & Good Samaritan Laws May Not Protect Personal Assets

At issue: Over-reliance and lack of clarity on these laws can leave gaps in protection.

Many states have enacted charitable immunity laws to help protect volunteer workers from being sued in connection with their volunteer service, including board service. But these laws vary widely on whether board members are immune from litigation.

Many common causes of litigation can fall outside of charitable immunity protection, such as employment-related claims, automobile accidents, and sexual misconduct allegations. Even if a church leader wasn’t directly involved in any of these exempted activities, they can still be named in a lawsuit resulting from them. Ace this: Ask your insurance agent how your insurance policy protects the personal assets of board members and leadership. Directors and Officers Liability (D&O)

Ace this: Ask your insurance agent how your insurance policy protects the personal assets of board members and leadership. Directors and Officers Liability (D&O) coverage provides coverage for acts of ministry leaders that fall outside the protection of state or federal charitable immunity laws. D&O coverage, along with the ministry’s general liability coverage, auto insurance, and other specialty coverages help fill the gaps left by these laws.*

Impose Term Limits on Board Members

At issue: Failure to cultivate new leaders often leads to board stagnation.

A board without term limits can result in an individual member having an outsized voice in church decisions, no plan for leadership succession, a lack of future planning, dysfunction, and more. Some members even feel a lack of ownership in decisions made by the board.

Ace this: Term limits help ensure that your board promotes new ideas, recruits new leaders, and recalibrates roles. Hedman says that term limits are a win for the organization. “New voices can bring objectivity, fresh opinions, and mentorship opportunities. Succession plans prevent burnout and keep a board healthy.”

*These coverage descriptions are intended to help ministry leaders better understand Brotherhood Mutual’s MinistryFirst® insurance program. It does not provide insurance coverage of any kind, nor does it modify the terms of any Brotherhood Mutual policy. For complete insurance coverage details, please refer to actual policy documents. Coverage for actual claims will be based on applicable policy documents applied to the individual facts of an actual claim event. Some coverages may not be available in all states.