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Faith and religious organizations can face many new and unique challenges to their operations. Through proper risk assessment and awareness of vulnerabilities and risk management, these dangers can be identified and reduced.

By Aliya Daya, Senior New Business Specialist and Account Executive, Commercial Lines

Faith and religious organizations are the cornerstone of any community; in addition to fulfilling a spiritual mission and offering worship, they are places of celebration, remembrance and gathering places tied to a communal identity or history.

On a personal note, this subject matter is important to me because my faith community is the anchor that not only defines my sense of self, but is the driver in all my personal life, career choices and decisions. They ground me and provide a sense of spirituality, belonging and direction. Feelings that I know many others identify with.

The last two years has been a been a tenuous and difficult period for these organizations and associated groups. Many having faced numerous concerns including:

• Having to adapt and pivot with technology and finding various ways to keep their members engaged in worship throughout the COVID-19 pandemic.
• Struggling to assist/counsel their congregants and members with mental health issues, addiction problems, inter-personal relationships, etc.
• Having their finances stretched; some organizations had to permanently close their doors due to lack of financial resources.
• Being targeted due to their specific religious beliefs or due to historical associations.
• Having their mission remain relevant, being present in the community, and keeping their volunteers and members active while adhering to pandemic restrictions.

With these changes and stressors, have come some not-so-new challenges and some unique ones as well. The key for faith-based organizations will be to assess and manage new and emerging risks and consider a full risk management approach as we enter a post-pandemic world. Here are some areas of particular concern:

Cyber & Privacy Breach Liability

Faith and religious organizations are not immune to cyber risks; in fact, they are a prime target for cybercriminals. What started out as a trend, cyberattacks exponentially accelerated during COVID-19 as churches, synagogues, mosques/masjids, temples, non-profits and others moved increasingly online for worship and to keep lines of communication open between management, employees and volunteers.

IT infrastructure requires monitoring, security policies and protocols, and adherence to specific rules and government regulations. Many faith organizations have limited financial investment in their IT, no IT support professionals on staff, and often no means of ensuring data security procedures and policies are implemented and followed. This leaves them extremely vulnerable to cybercrime, which can threaten operational continuity and create financial and legal liabilities.

Cyber and privacy breach insurance policies protect faith and religious organizations from data/privacy breach exposure, helping to cover expenses such as notification, regulatory fines and penalties, business interruption, data loss, cyber extortion (aka ransom), computer fraud and reputational harm.

Active Assailant and Terrorism

In the current climate, institutions must be aware of and prepared for the risk that active assailant attacks pose. The frequency and severity of these attacks has been rising rapidly in recent years, making active assailant attacks a very real threat to the general public and organizations all over the world. With their mission to be open and welcoming, houses of worship are particularly vulnerable to armed intruders and active threat situations.

I am a practicing Muslim and, after the Quebec City terrorist attack a few years ago, I live with the constant knowledge and anxiety that my community and place of worship can easily be the next news story or target.

The rising prevalence of active assailant tragedies has increased demand for coverage designed to protect faith and religious organizations from the financial and emotional/mental ruin that can happen in their wake.

An active assailant insurance policy is designed to address the impact of these events on the victims and the organization effected. Policies include victim compensation and support (including to faith community members and congregants), as well as incident response and crisis management services. Coverage is also offered for legal liabilities (victim lawsuits), damage to property (building or property repairs) and business interruption.

Insurers are also taking steps to help religious organizations manage risk by creating seminars and informational guides aimed at educating their staff members on developing security and response plans. Organizations should also try to create a strong relationship with local law enforcement for additional support.

Professional Liability or Errors & Omissions

Many faith and religious organizations provide spiritual counselling, other professional counselling services (like marriage counselling, financial counselling, addictions counselling) or other services (like adoption services, employment, social services, educational/tutoring classes) and are trusted to provide guidance and advice to their members. This leaves their organizations highly vulnerable to liability for financial loss and physical or emotional injury to congregation members who feel negatively impacted by such guidance.

From a risk management approach, a faith organization should also know:

• when to refer cases to a licensed professional;
• when the rules of confidentiality apply;
• how to avoid undue influence; and,
• how to reduce sexual misconduct or abuse risks.

An errors and omissions or professional liability policy can also protect faith and religious organizations and their service providers (either professionals, community leaders or members and volunteers) from professional negligence claims. These policies are written specifically for an organization’s particular risks and can help religious organizations weather lengthy cases and potentially catastrophic losses resulting from professional liability claims.

Abuse & Sexual Misconduct

Faith and religious organizations are at risk for abuse and sexual misconduct allegations when working with vulnerable adults, seniors/elders and children. It’s important that faith-based organizations ensure there are adequate policies in place to protect the communities that they serve; there are several practices that can be implemented to reduce an organization’s exposure to abuse or misconduct claims, including, but not limited to:

• developing adequate personal conduct policies;
• ensuring the proper selection of staff and volunteers;
• performing reference checks;
• continuing background checks; and,
• providing training.

Abuse and sexual misconduct liability protects the organization’s employees, directors, officers and volunteers on a claims made basis (most often) and covers legal defense costs against allegations associated with physical or emotional injury resulting from physical abuse, mental and emotional abuse, sexual abuse, molestation or exploitation. To obtain this type of coverage, faith organizations must prove they have performed background checks on employees and volunteers. Insurers also may require those with schools and daycare centres to have rules in place mandating a specific teacher-to-student ratio and rules that prohibit an adult employee from being alone with a child. All of this will be stipulated in the application process.

Directors & Officers Liability (D&O)

The leaders of faith-based and non-profit organizations face the same exposure to lawsuits as those at for-profit corporations; in fact, exposure related to a faith organization or non-profit is more critical as boards are often made up of (very) dedicated volunteers who have less formal understanding of financial accounting, employment laws and more. Directors or officers can be held personally liable for financial damages that result from their actions, including but not limited to:

• failing to maintain adequate financial records;
• discriminating in membership;
• defamation;
• exceeding the authority granted by an organization’s charter or bylaws; and,
• using budgeted or donated money in a manner differently than originally intended.

The potential financial damage from directors and officers’ liability claims supports a risk management approach that should include this cover for all faith and religious organizations and non-profits. A D&O policy would pay for legal fees or damage awards related to a lawsuit. Even if a claim is unfounded, the costs associated with legal disputes remain. D&O insurance, as a result, provides peace of mind for these organizations so that they can focus on delivering their services.

Protection for Faith-Based Missions and Communities

Religious and faith-based organizations face numerous and constantly evolving risks daily. If not properly addressed, these issues can detract from the organization’s core mission. But, through proper risk assessment and awareness of vulnerabilities and risk management, these dangers can be identified and reduced.

Our Faith Guard team at Rogers Insurance will work with you to develop a customized, all-encompassing insurance program to protect your faith organization. Contact us today to learn more.

Aliya Daya is a Senior New Business Specialist and Account Executive, Commercial Lines, with Rogers Insurance. With more than 20 years of experience in the insurance industry, Aliya specializes in innovation, technology, manufacturing/fabrication/wholesale/distribution, hospitality, religious organizations and disruption/emerging industries.

The pandemic has wreaked havoc with many things in our lives, including global supply chains. Availability of raw materials has forced product shortages and in turn increased construction material costs—which underscores the importance of checking your policy limits. Learn why it’s critical to reassess the replacement costs of your home or commercial building.

By Wendy Wildeman, VP, Commercial Lines

With limited product availability, increasing material costs and global supply chain issues, it is more important than ever for homeowners and business owners to re-evaluate the replacement costs of their buildings.

If you’ve been looking to upgrade a few things at home—such as installing a new furnace, hot water tank or air conditioner—you will no doubt understand the frustration that comes with the extended wait times for delivery on these items. Likewise, if your property was damaged by the large 2020 hailstorm in Calgary, you experienced the period after which siding and window products were nearly impossible to obtain.

Surging construction material costs have also contributed to the increased price tag for new builds and renovations. For example, lumber prices hit an all-time high in North America this past summer.

The impact of these delays, shortages and escalated prices extends to the replacement cost of your property—no matter if that is your home or a commercial building—and is putting everyone at risk of being underinsured in the event of a loss.

How Rising Costs Affect Your Insurance Coverage

Building construction prices spiked between 2020 and 2021, and have been steadily increasing this year, according to Statistics Canada.

For example, residential construction costs jumped by more than 20 per cent in the third quarter of 2021 compared to the same time period in 2020. Comparatively, non-residential construction costs increased by more than eight per cent. This has been adding tens of thousands of dollars—if not significantly more—to building costs.

To better understand how this impacts your property coverage, let’s review the definition of replacement costs in most insurance contracts, which reads as follows:

Replacement includes repair, construction or replacement
with new property of like kind and quality.

Sounds pretty straight forward, right?

Issues arises, however, when your policy limits are not sufficient to meet actual replacement costs—and not just the cost to construct the building. In the event of a major loss, there will be additional expenses for demolition and debris removal, potential site improvements and more. All these things must be taken into consideration when determining your replacement value and, therefore, policy limits—or you risk being underinsured in the event of a loss.

Add to this co-insurance requirements, which state that you must insure your property to at least 80 per cent or 90 per cent (as stated in your policy) of the full replacement value. If you fail to meet this requirement, you will be deemed a “co-insurer” and will not receive the full value of the claim cost. (Check out this blog post to learn more about co-insurance and how insurers calculate it.)

To summarize, outdated replacement costs for your properties could be putting you at risk of significant financial burden in the event of a loss. Not only may your limits be too low to cover actual, current day material, goods and services costs, but you may also fall short on your co-insurance requirements and, therefore, only receive a partial amount of the claim value.

The Importance of Insuring to Value

Analysts are projecting that supply chain struggles and inflation will continue well into 2022. So, it’s crucial that property owners act now—instead of waiting until renewal time—to ensure their policies reflect full replacement value.

The recommended first step in this process is to obtain a professional insurance appraisal. Unlike property assessment value or realty assessment value, an insurance appraisal calculates full reconstruction value, including the cost to:

• reconstruct the property;
• complete necessary site improvements; and,
• complete demolition and debris removal.

In some cases, insurers have a cost calculator that can assist homeowners with determining the proper amount; however, an independent appraisal is always the best approach for all property owners to avoid a shortfall in their claim payment due to a co-insurance penalty.

Your broker can connect you to a professional insurance appraiser, who’ll establish the most accurate replacement value for your properties. Your broker will then work with you to update your policy, based on your insurance appraisal, so your property is adequately covered for losses and co-insurance requirements.

The pandemic has wreaked havoc with many things in our lives, including the price to rebuild properties due to product shortages and increased construction material costs. This underscores the importance of insuring to value. Contact your broker today to discuss your policy limits and options to reassess the replacement costs of your home or commercial building.

Wendy Wildeman is the Vice President, Commercial Lines, at Rogers Insurance. With more than 40 years of industry experience, Wendy specializes in real estate insurance, from development and construction to commercial and condominium management groups.